(a) A retail company has a marginal profit curve given by: MP = -2 2+160Q + 2145. Determine the level of production, or range of production at which the company will have: (i) Increasing returns (ii) Decreasing returns (iii) Negative returns (iv) Its maximum profit (b) A production process varies only with raw materials, as all other inputs are fixed. The cost of a shipment of 8kg of raw materials is fixed at $85. It takes 5kg of raw materials to create one item of output, Q. The marginal revenue for this production process is expressed by: MR = -Q 2+52Q - 576. Determine the optimal amount of raw materials to be used in this production process. (c) A production process varies with both labour, Land raw materials, M. The production function is given: Q = 1.25L 0.38 +0.9M0.68 Current production level is Q = 800 items and marginal profit is given as a fixed $16.50. Determine what profit can be expected if: (i) Labour is increased by 25%. (ii) Both labour and raw materials are increased by 20%.
(a) A retail company has a marginal profit curve given by: MP = -2 2+160Q + 2145. Determine the level of production, or range of production at which the company will have: (i) Increasing returns (ii) Decreasing returns (iii) Negative returns (iv) Its maximum profit (b) A production process varies only with raw materials, as all other inputs are fixed. The cost of a shipment of 8kg of raw materials is fixed at $85. It takes 5kg of raw materials to create one item of output, Q. The marginal revenue for this production process is expressed by: MR = -Q 2+52Q - 576. Determine the optimal amount of raw materials to be used in this production process. (c) A production process varies with both labour, Land raw materials, M. The production function is given: Q = 1.25L 0.38 +0.9M0.68 Current production level is Q = 800 items and marginal profit is given as a fixed $16.50. Determine what profit can be expected if: (i) Labour is increased by 25%. (ii) Both labour and raw materials are increased by 20%.
Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
14th Edition
ISBN:9781305506381
Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Chapter14: Pricing Techniques And Analysis
Section: Chapter Questions
Problem 3E
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Transcribed Image Text:(a) A retail company has a marginal profit curve given by: MP =-2Q
2+ 160Q + 2145.
Determine the level of production, or range of production at which the company will
have:
(i) Increasing returns
(ii) Decreasing returns
(iii) Negative returns
(iv) Its maximum profit
(b) A production process varies only with raw materials, as all other inputs are fixed.
The cost of a shipment of 8kg of raw materials is fixed at $85.
It takes 5kg of raw materials to create one item of output, Q.
The marginal revenue for this production process is expressed by: MR = =Q
2 + 520 – 576.
2+52Q
Determine the optimal amount of raw materials to be used in this production process.
(c) A production process varies with both labour, L and raw materials, M. The production
function is
given: Q = 1.25L
0.38 +0.9M0.68
Current production level is Q= 800 items and marginal profit is given as a fixed $16.50.
Determine what profit can be expected if:
(i) Labour is increased by 25%.
(ii) Both labour and raw materials are increased by 20%.
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