Exercise 2: A perfectly competitive firm produces two goods, X and Y, which are sold at £36 and £200 per unit, respectively. The firm has a total cost function given by TC = 3x' + 2y-A where x corresponds to the quantity of Product X y corresponds to the quantity of product Y A corresponds to the last two digits of your IE student number. Determine the Profit function of this business scenario. a. b. Find the quantities of each good which must be produced and sold in order to maximise profits What is the maximum profit? C.

Exercise 2: A perfectly competitive firm produces two goods, X and Y, which are sold at £36 and £200 per unit, respectively. The firm has a total cost function given by TC = 3x' + 2y-A where x corresponds to the quantity of Product X y corresponds to the quantity of product Y A corresponds to the last two digits of your IE student number. Determine the Profit function of this business scenario. a. b. Find the quantities of each good which must be produced and sold in order to maximise profits What is the maximum profit? C.

Managerial Economics: A Problem Solving Approach

5th Edition

ISBN:9781337106665

Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Chapter3: Benefits, Costs, And Decisions

Section: Chapter Questions

Problem 9MC

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Assume that a firm in a competitive market faces the following cost information. If the market price for this firm's product is $40, calculate the profit maximizing level of output for this firm using marginal analysis. It may help to create your own cost table and fill in columns for Marginal Cost and Average Total Cost based on the Total Cost information below. a.What is the level of profit for this firm at the profit maximizing output? b.To convince yourself that the quantity you found is indeed the profit maximizing quantity, try calculating what the profit would be at the next higher level of output. What did you find? c. What do you predict will happen in this market over the long run?
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1. The total cost of producing a quantity q is C(q). The average cost a(q) is given in figure below. The following rule is used by economists to determine the marginal cost C'(q0), for any qo: Construct the tangent line ti to a(q) at qo. Let t, be the line with the same vertical intercept as t, but with twice the slope of t, . Then C'(q0), is the vertical distance shown in figure below. Explain why this rule works. $/unit a(q) t2 t1 C'(qo)
Suppose Larry runs a small business that manufactures shirts. Assume that the market for shirts is a price-taker market, and the market price is $10 per shirt. The following graph shows Larry's total cost curve. Use the blue points (circle symbol) to plot total revenue and the green points (triangle symbol) to plot profit for the first seven shirts that Larry produces, including zero shirts. 125 100 TOTAL COST AND REVENUE (Dollars) 25 ☐ Total Cost ☐ -50 0 1 2 3 4 5 6 7 8 QUANTITY (Shirts) Total Revenue A Profit (?) Calculate Larry's marginal revenue and marginal cost for the first seven shirts he produces and plot them on the following graph. Use the blue points (circle symbol) to plot marginal revenue and the orange points (square symbol) to plot marginal cost. 25 2 COSTS AND REVENUE (Dollars per shirt) 0 1 2 3 5 6 7 8 QUANTITY (Shirts) Marginal Revenue Marginal Cost Larry's profit is maximized when he produces is shirts. When he does this, the marginal cost of the previous shirt he…
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The marginal and average total cost curves for barbers in an area are cosntant at $12.00/haircut. The daily demand curve for haircuts in the area is given by: P = 22 - 0.001Qd where P is the price in dollars per haircut and Qd is the daily quantity demanded in number of haircuts. Haircuts are provided in a perfectly competitive market and each barber can provide exactly 25 haircuts daily. Suppose that the government decides to limit the number of barbers to 320. Each year, barbers must obtain a government-issued license to cut hair. Based upon the previous information: a. What will be the long-run equilibrium price for a haircut given there are only 320 licensed barbers?b. How much economic profit will each licensed barber earn daily?
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PRICE (Dollars per tracker) 30 80 70 60 ATC 20 AVC MC 10 0 0 10 20 30 40 50 60 70 80 90 100 QUANTITY (Thousands of trackers per day) In the short run, given a market price equal to $45 per tracker, the firm should produce a daily quantity of trackers. On the preceding graph, use the blue rectangle (circle symbols) to fill in the area that represents profit or loss of the firm given the market price of $45 and the quantity of production from your previous answer. Note: In the following question, enter a positive number regardless of whether the firm earns a profit or incurs a loss. The rectangular area represents a short-run of $ thousand per day for the firm.
Would a cost function of 0 mean a linear line of supply curve? For example if 10 firms are on the market selling 10 goods and the cost function is 0?