A company participating in a market of perfect competition invoices monthly 154,200 units, the sum of $308,400,000, so P = $2,000 With this level of sales, the company has saturated its production capacity and as a result its costs have risen sharply. Its marginal cost (MC) is MC = (q2 / 2,000,000) - (q / 20) + 2,450. It is determined that its fixed costs (FC) amount to $20,500,000. You want to know: (a) whether the company should increase or decrease its production and by how much. b) what would be the optimal level of production (q*)? c) what is the profit at the optimal level of production? d) what is the company's current profit?
A company participating in a market of perfect competition invoices monthly 154,200 units, the sum of $308,400,000, so P = $2,000 With this level of sales, the company has saturated its production capacity and as a result its costs have risen sharply. Its marginal cost (MC) is MC = (q2 / 2,000,000) - (q / 20) + 2,450. It is determined that its fixed costs (FC) amount to $20,500,000. You want to know: (a) whether the company should increase or decrease its production and by how much. b) what would be the optimal level of production (q*)? c) what is the profit at the optimal level of production? d) what is the company's current profit?
Managerial Economics: A Problem Solving Approach
5th Edition
ISBN:9781337106665
Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Chapter1: Introduction: What This Book Is About
Section: Chapter Questions
Problem 1.1IP
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Question
A company participating in a market of
With this level of sales, the company has saturated its production capacity and as a result its costs have risen sharply. Its marginal cost (MC) is
MC = (q2 / 2,000,000) - (q / 20) + 2,450.
It is determined that its fixed costs (FC) amount to $20,500,000. You want to know:
(a) whether the company should increase or decrease its production and by how much.
b) what would be the optimal level of production (q*)?
c) what is the profit at the optimal level of production?
d) what is the company's current profit?
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