ABC Manufacturing has found that when it charges $10 for its product, its total revenue is $5 million, whereas when it charges $20, its total revenue is $8 million. Its total cost function is: Total Cost = 3,000,000+.5Q² where Q is in millions and Total Cost is in millions. Assume that price is the only thing to change between the two different revenue points above. Is there enough information to determine whether this firm operates in a competitive market or has market power? a. yes, it operates in a competitive market b. yes, it has market power c. no there is not enough information

ABC Manufacturing has found that when it charges $10 for its product, its total revenue is $5 million, whereas when it charges $20, its total revenue is $8 million. Its total cost function is: Total Cost = 3,000,000+.5Q² where Q is in millions and Total Cost is in millions. Assume that price is the only thing to change between the two different revenue points above. Is there enough information to determine whether this firm operates in a competitive market or has market power? a. yes, it operates in a competitive market b. yes, it has market power c. no there is not enough information

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

Chapter22: Getting Divisions To Work In The Firm’s Best Interests

Section: Chapter Questions

Problem 22.1IP

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2. A firm can produce up to 500 units each week. If its average cost function is C(x) = 500/x + 1500 and its total revenue function is given by: R(x) = 1600x − x^2 • What production maximizes profit? What is the maximum profit for that production level? • What production makes the profit equal to zero? (that point is called the break-even point) 3. The joint cost (in thousands of euros) for two products X and Y can be given by the following formula: C(x, y) = 40 + y^2 + 3x + 2xy + (x^2) y + y^3 where x represents the quantity of product X that is produced and y represents the quantity of product Y produced. • If 12 units of product X and 20 units of product Y are produced, what are the marginal costs? • What product line should be expanded in the current level of production?
Output prices average (total)cost Total cost marginal cost Total profit/loss 10 10 -108 20 10 4 -48 30 10 5 3 40 10 6.20 40 50 10 8 60 60 10 10 60 2. i) Find the Average(total)cost, Total cost and marginal cost ii)In which market structure does Johnson Electronics (Pty)Ltd operate? iii)what level of output maximizes the firms profit
5. Suppose that a frm faces the demand curve of the form q = 60 2p. a) Write down the total revenue curve as a function of q. b) Assume MC = 0:2q and MR = 30q. What output level should the firm produce to maximize profits? c) Graph the demand, MC, and MR curves and the point of profit maximization.
1. Which statement must be false?a) A firm with constant returns to scale in production will not have fixed costs.b) When a firm has increasing returns to scale, the upward sloping marginal cost curve lies above the average cost curve.c) All firms face diminishing returns to scale when they have a high output.d) When a firm produces the output which minimises average cost, marginal cost and average cost will be equal. 2. Which of the following statements about the relationship between marginal revenue, price, and the price elasticity of demand, is true?a) A perfectly elastic demand curve will be vertical, showing that the firm sells a fixed output at all prices.b) The more inelastic the demand curve, the flatter it will be where it meets the price (vertical) axis.c) If the price elasticity of demand PED = -1 at all points on a demand curve, then the firm can choose any level of output, and earn the same revenue.d) When a monopoly maximises its profits, demand for its output will be…
Question #5What is the MC=MR Profit Maximization point? What quantity should Delicious Deserts be producing at 'and' what price should they be charging to maximize their profits? Question #6 Why isn't it a good idea for them to produce and sell as many cakes as they can? Is it more profitable to sell less cakes at this current stage of their business? Question #7Do you have any other recommendations for Delicious Deserts to increase their revenues, profits, market share, and client retention?
Habib Bank Limited estimates equation of demand of its product as: Q = 55 – 0.5P - (where P = price and Q = Quantity of output), and its total cost of production as TC = 20 + Q + 0.2Q2 Where TC = total cost and Q = Quantity of output) Write the equations of the firm’s costs, as a function of Q: Average Total Cost ATC? Average Variable Cost AVC? Average Fixed Cost AFC.? Marginal Cost MC? The output level that will maximize total profit and the amount of revenue and profit that Habib Bank would receive at optimal level of production.? The output level that minimizes average total cost.? please answer all questions
1. If profit is maximum at sales of 700 units, does the firm have no choice but to limit sales at this level? Explain your answer. 2. A business firm produces and sells a particular Variable cost is P30/unit. Selling price is P40 per unit. Fixed cost is P60,000. a. What is the break-even quantity and break-even point? Show your solution. 3. A manager makes the statement that output should be expanded as long as average revenue exceeds average Does this strategy make sense? Explain. 4. Suppose that the steel firm’s costs are shown below: Complete the table and determine the optimal output to be Price of steel P17 per unit. Output (Q) TFC TVC TC MC TR MR Profit/Loss 0 500 0 1 500 50 2 500 90 3 500 140 4 500 200 5 500 270 6 500 350 7 500 450…
4. You are the manager of a firm that produces products X and Y at zero cost. Youknow that different types of consumers value your two products differently, but you are unable toidentify these consumers individually at the time of the sale. In particular, you know there arethree types of consumers (100 of each type) with the following valuations for the two products: Consumer Type Product X Product Y1 $90 $ 602 $70 $1403 $40 $160 a. What are your profits if you charge $40 for product X and $60 for product Y?b. What are your profits if you charge $90 for product X and $160 for product Y?c. What are your profits if you charge $150 for a bundle containing one unit of product X andone unit of product Y?d. What are your profits if you charge $210 for a bundle containing one unit of X and one unit ofY, but also sell the…
22-1 Suppose that a paper mill “feeds” a downstream box mill. For the downstream mill, the marginal profitability of producing boxes declines with volume. For example, the first unit of boxes increases earnings by $10, the second by $9, the third by $8, and so on, until the tenth unit increases profit by just $1. The cost the upstream mill incurs for producing enough paper (one “unit” of paper) to make one unit of boxes is $3.50. Assume the two mills operate as separate profit centers, and the paper mill sets the price of paper. It follows that the marginal profitability of boxes represents the highest price that the box division would be willing to pay the paper division for boxes.. Furthermore, assume that fixed costs are $0 for the paper mill. The following table summarizes the quantity, total revenue, and marginal costs from the perspective of the paper mill for selling paper to the box mill at various prices. In the following table, fill in the marginal revenue, total…
5. Suppose the cost function for a firm is given by C(Q) = 200 + 2Q2. If the firm sells output in a perfectly competitive market and other firms in the industry sell output at a price of 20 AED, what level of output should the firm produce to maximize profits or minimize losses? What will be the level of profits or losses if the firm makes the optimal decision?
7. Refer to Figure 16-2. Which letter identifies the profit-maximizing level of output for this firm? 8. Refer to Figure 16-2. Which letter identifies the efficient level of output for this firm?
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