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    Profit Max

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    Hello,

    I have attached some HW problems that I need help on.

    Thanks!

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    https://brainmass.com/economics/supply-and-demand/profit-max-273503

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    P1 - Price/Output Determination. Cold Case, Inc., produces beverage containers used by fast food franchises. This is a perfectly competitive market. The following relation exists between the firm's beverage container output per hour and total production costs:

    Total Output Total Cost
    0 $35
    1,000 85
    2,000 145
    3,000 215
    4,000 295
    5,000 385
    6,000 485
    7,000 610

    A. Construct a table showing the marginal cost of paper cup production.
    Total Output Total Cost Marginal Cost
    0 $35
    1,000 85 $50
    2,000 145 $60
    3,000 215 $70
    4,000 295 $80
    5,000 385 $90
    6,000 485 $100
    7,000 610 $125

    B. What is the minimum price necessary for the company to supply one thousand cups?
    The total cost for producing 1000 cups is $85. So the company should keep minimum price of cups at $85 per thousand.

    (Remember in a competitive market, price = marginal revenue.)
    C. How many cups would the company supply at industry prices of $75 and $100 per thousand?
    For profit maximization, the firm should produce at MC=MR, in a competitive market MR=P
    When P=MR=$75
    The MC increases as firm increase the total output, at 3000 units the MC is $70 and at 4000 units the MC is $80. So the firm should produce and sell 3000 units.
    Profits = 3000*75/1000-215=$10

    When P=MR=$100
    The MC increases as firm increase the total output. MC is exactly equal to $100 at 6000 units. So the firm should produce and sell 3000 units.
    Profits = 6000*100/1000-485=$115

    P2 - Price/Output Determination. The accompanying graph summarizes the demand and
    costs for a firm that operates in a perfectly competitive market.

    Price

    48
    46
    44
    42 ATC
    40
    38
    36
    34
    32
    30
    28 MR
    26
    24
    22 AVC
    20
    18
    16
    14
    12 AFC
    10
    8
    6
    4
    2
    0
    1 2 3 4 5 6 7 8 9 10
    Quantity
    a. What level of output should this firm produce in the short run?
    In the short run firm should produce as long as the MC<MR. The MC curve passes the MR curve between 6 and 7 units. Thus, the firm should produce 6 units.

    b. What price should this firm charge ...

    $2.19