Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
14th Edition
ISBN: 9781305506381
Author: James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher: Cengage Learning
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Chapter B, Problem 5E
To determine
To evaluate the total profit as the difference between total revenue and total cost, and it is to be expressed in terms of Q.
To determine
To evaluate the output level where total profits are maximized.
To determine
To evaluate the total profits and selling price at the profit maximizing output level.
To determine
To evaluate the effects if fixed costs increase from $20 to $25 on the profit maximizing output level and total profits.
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Define Q to be the level of output produced and sold and assume that the firm’s cost function is given by the relationship: TC = 20 + 5Q+Q2. Furthermore, assume that the demand for the output of the firm is a function of price P given by the relationship: Q=25− P
a)Define total profit as the difference between total revenue and total cost and express in terms of Q the total profit function for the firm.
Note: Total revenue equals price per unit times the number of units sold.
b)Determine the output level where total p rofits are maximized.
c)Calculate total profits and selling price at the profit-maximizing output level.
d) If fixed costs increase from $20 to $25 in the total cost relationship, determine the effects of such an increase on the profit-maximizing output level and total profits.
Use the cost and demand functions in Exercise 5 to calculate the following:
e)Determine the marginal revenue and marginal cost functions.
f) Show that, at the profit-maximizing output level…
Define Q to be the level of output produced and sold, and assume that the firm’s cost function is given by the relationship TC = 20 + 5Q + Q2 Furthermore, assume that the demand for the output of the firm is a function of price P given by the relationship Q = 25 - P a. Define total profit as the difference between total revenue and total cost, and express in terms of Q the total profit function for the firm. (Note: Total revenue equals price per unit times the number of units sold.) b. Determine the output level where total profits are maximized. c. Calculate total profits and selling price at the profit-maximizing output level. d. If fixed costs increase from $20 to $25 in the total cost relationship, determine the effects of such an increase on the profit-maximizing output level and total profits.
The demand function for a firm is; Qd = 122,000 - 500P + 4M +10,000PR where, Qd is quantity
demanded, P is price per unit. M is income, and PR the price of a related good. The estimated the
valueS of M and PR will be Rs 3200 and Rs 4, respectively.
The firm's estimated average variable coSt function IS; AVC = 500 - 0.03Q + 0.000001Q2
a. Find the profit maximizing level of output of the firm and the price to charge.
b. Should the manager continue production or shut down? Explain your answer.
c. Find the level of output at which the average variable cost is at its minimum.
Chapter B Solutions
Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
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