Purchase Solution

Calculating profit maximizing output level in the given case

Not what you're looking for?

Ask Custom Question

The El Dorado Star is the only newspaper in El Dorado, New Mexico. Certainly, the Star competes with The Wall Street Journal, USA Today, and the New York Times for national news reporting, but the Star offers readers stories of local interest, such as local news, weather, high- school sporting events, and so on. The El Dorado Star faces the demand and cost schedules shown in the spreadsheet that follows:

Number of Total Revenue Total cost
newspapers per day per day per day
(Q) $(TR) $(TC)
0 0 2,000
1,000 1,500 2,100
2,000 2,500 2,200
3,000 3,000 2,360
4,000 3,250 2,520
5,000 3,450 2,700
6,000 3,625 2,890
7,000 3,725 3,090
8,000 3,625 3,310
9,000 3,475 3,550

a.How many papers should be sold daily to maximize profit?
b. What is the maximum profit the El Dorado Star can earn?
c. What is the total fixed cost for the El Dorado Star? If the total fixed cost increases to $5,000, how many papers should be sold daily for profit maximization?

Purchase this Solution

Solution Summary

Solution describes the steps to calculate optimal output level and profit associated with it. It also analyzes the effect of changes in fixed cost on optimal output level.

Solution Preview

Please refer attached file for better clarity of tables and formulas.

Number of Total Revenue Total Cost Marginal Revenue Marginal Cost
Newspapers per day, Q per day, TR per day, TC MR* MC**
0 0 2000
1000 1500 2100 1.50 0.10
2000 2500 2200 1.00 0.10
3000 3000 2360 0.50 0.16
4000 3250 2520 0.25 0.16
5000 3450 2700 0.20 0.18
6000 3625 2890 0.18 0.19
7000 3725 3090 0.10 0.20
8000 3625 3310 -0.10 0.22
9000 ...

Solution provided by:
Education
  • BEng (Hons) , Birla Institute of Technology and Science, India
  • MSc (Hons) , Birla Institute of Technology and Science, India
Recent Feedback
  • "Thank you"
  • "Really great step by step solution"
  • "I had tried another service before Brain Mass and they pale in comparison. This was perfect."
  • "Thanks Again! This is totally a great service!"
  • "Thank you so much for your help!"
Purchase this Solution


Free BrainMass Quizzes
Elementary Microeconomics

This quiz reviews the basic concept of supply and demand analysis.

Pricing Strategies

Discussion about various pricing techniques of profit-seeking firms.

Basics of Economics

Quiz will help you to review some basics of microeconomics and macroeconomics which are often not understood.

Economics, Basic Concepts, Demand-Supply-Equilibrium

The quiz tests the basic concepts of demand, supply, and equilibrium in a free market.

Economic Issues and Concepts

This quiz provides a review of the basic microeconomic concepts. Students can test their understanding of major economic issues.