Economics (MindTap Course List)
13th Edition
ISBN: 9781337617383
Author: Roger A. Arnold
Publisher: Cengage Learning
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Chapter 22.2, Problem 3ST
To determine
Explain the two ways of profit maximization.
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To increase a company's profit, a manager suggests that the company needs to increase the value of its product to customers.
Suppose, per the manager's advice, the company successfully increases the value of its product to its customers. At the same time, however, the cost per unit of the good increases by more than the price of the good increases.
Indicate whether profit per unit will increase, decrease, or stay the same (no change).
For the pizza seller whose marginal, average variable, and average total cost curves are shown in the graph below, what is the profit-maximizing level of output and how much profit will this producer earn if the price of pizza is $1.00 per slice?
Suppose you are an economist working in a watch factory operating in a competitive market. The cost is given by: CT = 200 + Q2, where Q is the level of production and CT is the Total Cost, the CMg (marginal cost) of production is 2Q. The Fixed Cost of production is $ 150.
a. If the price of the watches is $ 60. How many watches must they make to maximize profit?b. What would be the level of utility?c. At what minimum price would the company make a positive output?
Chapter 22 Solutions
Economics (MindTap Course List)
Ch. 22.1 - Prob. 1STCh. 22.1 - Prob. 2STCh. 22.1 - Prob. 3STCh. 22.1 - Prob. 4STCh. 22.2 - Prob. 1STCh. 22.2 - Prob. 2STCh. 22.2 - Prob. 3STCh. 22.2 - Prob. 4STCh. 22.3 - Prob. 1STCh. 22.3 - Prob. 2ST
Ch. 22.3 - Prob. 3STCh. 22.3 - Prob. 4STCh. 22.4 - Prob. 1STCh. 22.4 - Prob. 2STCh. 22 - Prob. 1QPCh. 22 - Prob. 2QPCh. 22 - Prob. 3QPCh. 22 - Prob. 4QPCh. 22 - Prob. 5QPCh. 22 - Prob. 6QPCh. 22 - Prob. 7QPCh. 22 - Prob. 8QPCh. 22 - Prob. 9QPCh. 22 - Prob. 10QPCh. 22 - Prob. 11QPCh. 22 - Prob. 12QPCh. 22 - Prob. 13QPCh. 22 - Prob. 14QPCh. 22 - Prob. 15QPCh. 22 - Many plumbers charge the same price for coming to...Ch. 22 - Prob. 17QPCh. 22 - Prob. 18QPCh. 22 - Prob. 1WNGCh. 22 - Prob. 2WNGCh. 22 - According to the accompanying table, what quantity...Ch. 22 - Prob. 4WNGCh. 22 - Prob. 5WNGCh. 22 - Prob. 6WNGCh. 22 - Prob. 7WNGCh. 22 - Prob. 8WNGCh. 22 - Prob. 9WNGCh. 22 - Prob. 10WNG
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- Profit maximization using total cost and total revenue curves Suppose Caroline runs a small business that manufactures shirts. Assume that the market for shirts is a competitive market, and the market price is $20 per shirt. The following graph shows Caroline's total cost curve. Use the blue points (circle symbol) to plot total revenue and the green points (triangle symbol) to plot profit for shirts quantities zero through seven (inclusive) that Caroline produces. Caroline's profit is maximized when she produces______ shirts. When she does this, the marginal cost of the last shirt she produces is ______, which is (GREATER OR LESS) than the price Caroline receives for each shirt she sells. The marginal cost of producing an additional shirt (that is, one more shirt than would maximize her profit) is _____, which is (GREATER OR LESS) than the price Caroline receives for each shirt she sells. Therefore, Caroline's profit-maximizing quantity corresponds to the…arrow_forwardFor the pizza seller whose marginal, average variable, and average total cost curves are shown in the graph below, what is the profit-maximizing level of output and how much profit will this producer earn if the price of pizza is $1.50 per slice?Instructions: In the graph below, label all three curves by clicking on the dropdown to select the appropriate label. Instructions: Enter your response as a whole number. If you are entering a negative number, be sure to include a negative sign (−). When the price is $1.50 per slice, the profit-maximizing level of output is slices per day. Instructions: Enter your response rounded to the nearest penny (two decimal places). At the profit-maximizing level of output, the producer's profit is: $ per day.arrow_forwardQuestion content area left Part 1 In the figure, if the firm increases its output from Q1 to Q2, it willarrow_forward
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- Explain why a firm might want to produce its good even after diminishing marginal returns have set in and marginal cost is on the rise. People often believe that large firms in an industry have cost advantages over small firms in the same industry. For example, they might think a big oil company has a cost advantage over a small oil company. For this to be true, what condition must exist? Explain your answer.arrow_forwardQuestion 2 You are the manager of medium-sized company that produces a particular kind of alcoholic beverage (BB Bitters) in Ghana. You purchased most ingredients such as ethanol on a competitive market. One morning, you picked up a copy of the Graphic Business, published by the Graphic Communications Group limited, and read an article indicating that the price of ethanol is expected to rise, forcing manufacturers to produce at a high unit cost. In addition, the article indicated that your competitors are expected to reduce the price per unit of Alomo Bitters. Based on this information, what can you expect to happen to the equilibrium price and equilibrium quantity of your product? Explain your answer with an appropriate diagram.arrow_forwardSuppose that the Travnikar Corporation manufactures widgets. Analysts that work for the company have found a function C(x) which reports the cost to produce x widgets and a function R(x) which reports the total revenue from selling x widgets. Currently, the company is producing 500 widgets, but the analysts find that R'(500)=85 and C'(500)=79. In order to maximize profits, should the analysts recommend increasing or decreasing production?arrow_forward
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