a)
To Calculate: The level of output that should be produced to maximize short-run profits.
a)
Answer to Problem 8E
Profit maximization output is
Explanation of Solution
Given:
Estimated
Total cost function for the poster bed
Explain:
Total revenue function is differentiated to know the Marginal Revenue (MR)
Total Cost (TC)
On differentiating the total cost function
Following is the condition for profit maximization
On solving the quadratic equation
Introduction: Suppose if the firm in the competitive market try to increase the profits. If the firm is in short-run, there is more possible to the firm’s economic profits will be positive, negative or zero. When the firm on the
b)
To Calculate: The kind of price should be charged.
b)
Answer to Problem 8E
Price to be charged is 1,221.44
Explanation of Solution
Given:
Estimated demand function for the bed
Total cost function for the poster bed
Explain:
Substituting the value of Q in demand function:
Introduction: One of the main object in the economic condition is Price. Price is the most important value for the goods and services when transaction occurs. Price is any kind of specific good or service through the relationship between the demand and supply.
c)
To Compute: The total profits at this given price-output level
c)
Answer to Problem 8E
Total Profit at this given price-output level is $30,674.42
Explanation of Solution
Given:
Estimated demand function for the bed
Total cost function for the poster bed
Explain:
Total Revenue
Substituting the value of Q in total cost function:
Introduction: One of the common measure of the success is the total profit. This is always equal to the net revenue will remain once all the costs have been deducted. Total profit the base income of the business through this tax will be computed and determines the payment to dividend for the shareholders.
d)
To Compute: The point price
d)
Answer to Problem 8E
The point price elasticity of demand at the profit-maximizing level of output is
Explanation of Solution
Given:
Estimated demand function for the bed
Total cost function for the poster bed
Explain:
Following is the demand function given:
Point of Elasticity of Demand
Differentiating the demand function with respect to price
Substituting the values in the formula given
Point of Elasticity of Demand
Introduction: Profit-Maximizing is one of the short-run and also long-run process. In that, a firm will describe the level of the price, input and output range to yield the best higher profit. Suppose if the firm need to reach the highest equilibrium, there is having some changes in the level of the output to maximize the product.
e)
To describe: The level of fixed costs is the firm experiencing on its bed production.
e)
Answer to Problem 8E
The level of fixed costs does not vary with the firm experiencing on its bed production.
Explanation of Solution
Given:
Estimated demand function for the bed
Total cost function for the poster bed
Explain:
The poster Company having the demand for its canopy bed to the given estimated demand function and also the cost analysis department having the given estimated total cost function for the poster bed.
Based on the given estimated demand function and estimated total cost function, the fixed cost is 24,000.
Hence, the fixed cost is 24,000 that does not vary with change in the level of output.
Introduction: Fixed cost is define as the cost that will not change to the increase or decrease of the quantity of the goods and services to be produce or sale. Fixed cost is the main expenses of the firm that will be paid by the company.
f)
To describe: The impact of a $5,000 increase in the level of fixed costs on the price charged, output produced, and profit generated.
f)
Answer to Problem 8E
The impact of a $5,000 increase in the level of fixed costs on the price and output will not be affected.
Explanation of Solution
Given:
Estimated demand function for the bed
Total cost function for the poster bed
Explain:
The poster Company having the demand for its canopy bed to the given estimated demand function and also the cost analysis department having the given estimated total cost function for the poster bed.
Price and output would not be affected by the increase in the fixed cost. Fixed cost does not increase with change in output. But Profit would be declined by the $5,000.
Introduction: Fixed cost is the
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Chapter 10 Solutions
Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
- In the long run period, a small number of firms produces the differentiated product "X" in a monopolistic competition market. The total demand for this product "X" can be written as: Qp(p) = 1350 – 45p The total cost function is: 1 TC = q³ – 3q² + 40q 10 What is the number of firms in this market?arrow_forwardWidget Sales Jesaki Inc. is trying to enter the widget market. The research department established the following price-demand, cost, and revenue functions: p(x)=60-1.20x C(a) = 210 + 12x |R(x) = xp(x) = x(60 - 1.20x) Revenue function where x is in thousands of widgets and C(x) and R(x) are in thousands of dollars. The price p(z) is the price in dollars of one widget when the demand is a thousand widgets. All three functions have domain 1 ≤ ≤ 50. Use this information to answer questions 1-10 below. Price-demand function Cost functionarrow_forwardA boutique beer brewery produces 2 types of beers, Dark-ale and Light-ale daily with a total cost function given by TC = 8D + D XL+ 3L where D is the quantity of Dark-ale beer (in kegs) (not kg), and L is the quantity of Light-ale beer (in kegs) The prices that can be charged are determined by supply and demand forces and are influenced by the quantities of each type according to the following equations: PD=53-D + L for the price $/keg for Dark-ale beer PL = 42 + 2D-L for the price $/keg for Light-ale beer The total revenue is given by the equation: TR = PD X D + P₁ x L And the profit given by the equation: Profit = TR - TC (a) Write down the profit in terms of D and L only. (b) The total production (quantity) of both beers combined is restricted to 191 kegs. Formulate the problem using the method of Lagrange multipliers. Find the maximum profit for the appropriate values of D and L. Note that they need not be whole numbers. Note that to get full marks, you need to check that the…arrow_forward
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- Managerial Economics: Applications, Strategies an...EconomicsISBN:9781305506381Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. HarrisPublisher:Cengage Learning