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    Lagrangian Multipliers

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    Fixed capital and labor expenses are $1.2 million per year.
    Variable expenses average $2,000 per van conversion.
    Q=1,000 - 0.1P where Q is the number of van conversions (output) and P is price.
    Calculate the profit maximizing output, price and profit levels.

    © BrainMass Inc. brainmass.com October 9, 2019, 5:41 pm ad1c9bdddf
    https://brainmass.com/economics/principles-of-mathematical-economics/lagrangian-multipliers-64453

    Solution Preview

    Fixed cost = 1,200,000
    Unit Variable cost = 2000
    So the cost function is TC = FC + VC = 1200,000 + 2000 Q
    Then marginal cost = AVC = 2000

    Since Demand is Q ...

    Solution Summary

    Calculate the profit maximizing output, price and profit levels.

    $2.19