You are the manager of a firm that sells its product in a competitive market at a price of $40. Your firm's total cost function is C=4Q^2 and marginal cost is MC=8Q. What is your profit-maximizing quantity (Q) and price (P), and what is your firm's economic profit? If you operate a typical firm in this market, what will happen in the long run in the market's Q, P and profits if there is no change in demand for the product? Describe a strategy that you can implement to increase your profits in the short-run?

2. You are managing a monopoly that faces a demand curve described by P=85-5Q. Total revenue is TR=85Q-5Q^2 (^=squared), and marginal revenue is MR=85-10Q. Your monopoly's total cost function is TC=20+5Q, and marginal cost is MC=5. What are your profit-maximizing quantity (Q) and price (P), and if any, your economic profits? In the short-run, how can you make more profits?

Solution Preview

1. You are the manager of a firm that sells its product in a competitive market at a price of $40. Your firm's total cost function is C=4Q^2 and marginal cost is MC=8Q. What is your profit-maximizing quantity (Q) and price (P), and what is your firm's economic profit? If you operate a typical firm in this market, what will happen in the long run in the market's Q, P and profits if there is no change in demand for the product? Describe a strategy that you can implement to increase your profits in the short-run?

C = 4Q^2 and MC=8Q
In the competitive market, the ...

... 125X+100Y ≤ 25000 20X+30Y≤ 6000 The objective function is Maximize profit Z= 90X ... The coordinates of extreme points are A = (0,200) B=(85.7143, 142.857) C ...

... the profit-maximizing output for this firm is: a) 100 units b) above 290 units c) 290 units d) 200 units c) 290 units This is the point where the profits that ...

corner point method. Consider the following linear program. Maximize Profit = 20X + 8Y. Subject to: X + Y < 12 Constraint #1. X + 3Y < 27 Constraint #2. ...

... this profit-maximizing output? d. At what output will average variable cost be minimized? e. What is the value of average variable cost at its minimum point? ...

... d. Find the price that maximizes total revenue. What is the elasticity of demand at this point? ... Find Jamison's profit maximizing output and price. ...

... B. maximize its profit by producing in the short run. ... to reduce its losses as AVC < 16 at this point. ... A profit-maximizing monopolist will set its price: A. as ...

... In short run, profits are maximized when MR ...point G. The vertical line through point G cuts the demand function at J, hence the profit maximizing price is A ...

... For profit maximization, keep on adding the workers as long ... The 6th worker will reduce the profits as his MRP ... a. Is the firm maximizing output relative to its ...

... c.Find the point(s) (x,y) that maximizes the objective function ... of A and B should be manufactured in order to maximize profits? What would the maximum profit be ...