MICROECONOMICS+CONNECT RMU EDITION
21st Edition
ISBN: 9781264088874
Author: McConnell
Publisher: MCG
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Chapter 10.3, Problem 3QQ
To determine
Maximization of profit.
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(a) How would one estimate the full cost to an airline if one of its planes is held over for 24 hours in an airport for repair?
(b) A company has spent $10 million to develop a product for market. During the productās first two years, the companyās profit was $6 million. In recent years, the market was flooded by rival products and now the company is reassessing its product. If it abandons the product, it can recover $2 million of its original investment by selling its production facility. If it continues to produce the product, its estimated revenues for successive two-year periods will be $5 million and $3 million and its costs will be $4 million and $2.5 million. (After four years the plant will have zero resale value.) What would be the companyās best course of action?
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Pharmed Caplets is an antibiotic product with monthly revenues and
Pharmed Caplets is an antibiotic product with monthly revenues and costs of:TR = $900Q – $0.1Q2 ………… TC = $36,000 + $200Q + $0.4Q2MR = ∂TR/∂Q = $900 – $0.2Q ……. MC = ∂TC/∂Q = $200 + $0.8QA. Set up a spreadsheet for output (Q), price (P), total revenue (TR), marginal revenue (MR), total cost (TC), marginal cost (MC), average cost (AC), total profit (π), and marginal profit (Mπ). Establish a range for Q from 0 to 1,000 in increments of 100 (i.e., 0, 100, 200, …, 1,000).B. Using the spreadsheet to, create a graph with MR, MC, and AC as dependent variables and units of output (Q) as the independent variable. At what price/output combination is total profit maximized? Why? At what price/output combination is average cost minimized? Why?C. Determine these profit-maximizing and average-cost minimizing price/outputā¦
Have you ever driven by a poorly maintained business facility and wondered why the owner either fix up the property or go out of business? Consider the story of the Still There Motel on Old Highway North, Anytown, USA. a. Which of the following cases might apply to this motel?i. P > ATC making positive profitii. P = ATC making zero profit (Break-even point)iii. P > AVC and P < ATC covering AVC and some of AFCiv. P = AVC cover only AVC and none of AFCv. P < AVC (shut-down point) b. Explain why?
Chapter 10 Solutions
MICROECONOMICS+CONNECT RMU EDITION
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