An automobile repair shop charges the competitive market price of $16 per bike repaired. The firm's short-run total cost is given by STC(Q) = Q³/3. 1. What quantity should the firm produce if it wants to maximize its profit? 2. What is the maximized profit at the optimal level of quantity and the price of $16 ( round to two decimal points )? 3. Draw the shop's total revenue and total cost curves, and graph the total profit on the same diagram. Using your graph, label the point of profit-maximizing quantity and its profit level. 4. Suppose now the new price is P'. What is the profit-maximizing quantity as a function of P'. If the price increases by a factor of four (i.e. price = 4P'), how much does the profit-maximizing quantity increase?

An automobile repair shop charges the competitive market price of $16 per bike repaired. The firm's short-run total cost is given by STC(Q) = Q³/3. 1. What quantity should the firm produce if it wants to maximize its profit? 2. What is the maximized profit at the optimal level of quantity and the price of $16 ( round to two decimal points )? 3. Draw the shop's total revenue and total cost curves, and graph the total profit on the same diagram. Using your graph, label the point of profit-maximizing quantity and its profit level. 4. Suppose now the new price is P'. What is the profit-maximizing quantity as a function of P'. If the price increases by a factor of four (i.e. price = 4P'), how much does the profit-maximizing quantity increase?

Principles of Economics, 7th Edition (MindTap Course List)

7th Edition

ISBN:9781285165875

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter14: Firms In Competitive Markets

Section: Chapter Questions

Problem 4PA

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