Ecotripper Enterprises is the sole producer of Sunblast solar-powered skateboards, “The green alternative”. Market demand for Sunblasts is given by the formula: P=120-0.5Q, where p is in $ per skateboard and Q in skateboards per week. Total costs, in $ per week, are given by: TC=100+20Q, and marginal cost (MC) equal 20. a.) Derive the marginal revenue function and calculate the profit-maximizing price, quantity sold and the profit. b.) If the government imposes a price ceiling of $ 65 per skateboard, what is the effect on the equilibrium and the values derived in a.)? c.) If the government wanted Ecotripper to produce the socially efficient quantity of skateboards, what price ceiling could it set in the short run? What would the result be in the long run? d.) If the government decided to set the price ceiling so that consumer surplus was maximized subject to Ecotripper earning zero profits, what would be the level of the price ceiling, the quantity sold and the consumer surplus?
Ecotripper Enterprises is the sole producer of Sunblast solar-powered skateboards, “The green
alternative”. Market demand for Sunblasts is given by the formula:
P=120-0.5Q, where p is in $ per skateboard and Q in skateboards per
week. Total costs, in $ per week, are given by:
TC=100+20Q, and marginal cost (MC) equal 20.
a.) Derive the marginal revenue function and calculate the profit-maximizing
sold and the profit.
b.) If the government imposes a
equilibrium and the values derived in a.)?
c.) If the government wanted Ecotripper to produce the socially efficient quantity of
skateboards, what price ceiling could it set in the short run? What would the result be in
the long run?
d.) If the government decided to set the price ceiling so that
maximized subject to Ecotripper earning zero profits, what would be the level of the price
ceiling, the quantity sold and the consumer surplus?
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