Purchase Solution

profit and optimal price

Not what you're looking for?

Ask Custom Question

The Appalachian Coal Company sells coal to electric utilities in the southeast. Unfortunately, Appalachian's coal has high particulate content and therefore the company is adversely affected by state and local regulations governing smoke and dust emissions at its customers' electricity-generating plants. Appalachian's total cost and marginal cost functions are:

TC = $250,000 + $5Q + $0.0002Qsquare

MC = Delta TC/Delta Q = $5 + $0.0004Q

where Q is tons of coal produced per month and TC includes a normal rate of return on investments.

(A) Calculate Appalachian's profit at the profit-maximizing activity level if prices in the industry are stable at $25 per ton and therefore P = MR = $25.

(B) Calculate Appalachian's optimal price, output, and profit levels if a new state regulation results in a $300,000 fixed cost increase that cannot be passed onto customers.

Attachments
Purchase this Solution
Solution Summary

The expert calculates the Appalachian's optimal price, output, and profit levels in this case.

Solution Preview

The Appalachian Coal Company sells coal to electric utilities in the southeast. Unfortunately, Appalachian's coal has high particulate content and therefore the company is adversely affected by state and local regulations governing smoke and dust emissions at its customers' electricity-generating plants. Appalachian's total cost and marginal cost functions ...

Purchase this Solution
Free BrainMass Quizzes
Economic Issues and Concepts

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

Basics of Economics

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

Elementary Microeconomics

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

Economics, Basic Concepts, Demand-Supply-Equilibrium

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

Pricing Strategies

Discussion about various pricing techniques of profit-seeking firms.

View More Free Quizzes
Related BrainMass Solutions

  • Solve in QM for Windows

    The expert develops a nonlinear profit function for the tire company and determined the optimal price, the optimal volume and the maximum profit that week. A complete, neat and step-by-step solution is provided in the attached file.

  • Determining optimal output level for a monopolist

    ATC=OB dollars Solution describes the steps for determining optimal output level, price and corresponding profit for a monopolist.

  • profit maximizing output and the level of optimal profit for the firm

    The firm faces a market price of $15. Algebraically calculate the profit maximizing output and the level of optimal profit for the firm.

  • Managerial Economics: Calculating Maximum Profit and Revenue

    Using algebra determine the optimal output, price, profit and revenue for the firm. (i) Using algebra determine the profit maximizing output, price and optimal profit for the firm.

  • Economics

    The optimal strategy for each firm is to keep high price. The pay off for each dealer at the optimal strategy i.e. if both the dealers agreed to keep the high price then both of them will get the highest profit of 2000,000.

  • Pen production problem using Linear Programming technique

    Determine the optimal solution and optimal profit. Interpret the optimal solution and optimal profit. 3. Answer the following questions by using the sensitivity analysis (ranging) results from Question 2.

  • Profit-maximizing price: Geographically divided markets

    Find the profit-maximizing price and quantity in each market.

  • Finding dominant and optimal strategy

    Solution describes the steps to find out dominant and optimal strategy for each player.

  • Determining Optimal Output level

    Solution describes the steps to find out price, output, profit per unit and ATC at optimal level of output for a monopolistically competitive firm. It also determines the price for a competitive firm in the long run.

  • Decision Making

    MR and MC curve will intersect each other at a output level of 550 units. So, optimal production should be 550 units a price level of $10. j. If you produce, what is your total profit? AVC at output level of 550 units is $7.

View More Related Solutions