A consulting company estimated market demand and supply in a perfectly competitive industry and obtained the following results: Qd = 25,000 − 5,000P + 25M Qs = 240,000 + 5,000P − 2,000P1 where P is price, M is income, and P1 is the price of a key input. The forecasts for the next year are M̂ = $15,000 and p̂1 = $20. Average variable cost is estimated to be AVC = 14 − 0.008Q + 0.000002Q2 Total fixed cost will be $6,000 next year. What will the firm's profit (loss) be? a. $26,000 b. $20,000 c. −$6,000, the firm shuts down and loses only its fixed costs. d. $30,000 e. $36,000
A consulting company estimated market demand and supply in a perfectly competitive industry and obtained the following results: Qd = 25,000 − 5,000P + 25M Qs = 240,000 + 5,000P − 2,000P1 where P is price, M is income, and P1 is the price of a key input. The forecasts for the next year are M̂ = $15,000 and p̂1 = $20. Average variable cost is estimated to be AVC = 14 − 0.008Q + 0.000002Q2 Total fixed cost will be $6,000 next year. What will the firm's profit (loss) be? a. $26,000 b. $20,000 c. −$6,000, the firm shuts down and loses only its fixed costs. d. $30,000 e. $36,000
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
Chapter9: Applications Of Cost Theory
Section: Chapter Questions
Problem 2.2CE
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Question
A consulting company estimated market demand and supply in a
Qd = 25,000 − 5,000P + 25M
Qs = 240,000 + 5,000P − 2,000P1
where P is
Total fixed cost will be $6,000 next year. What will the firm's
a.
$26,000
b.
$20,000
c.
−$6,000, the firm shuts down and loses only its fixed costs.
d.
$30,000
e.
$36,000
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