solutionsps6f06 - Problem Set 6 Econ 101 Fall 2006 1...

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Problem Set 6 Econ 101 - Fall 2006 1. Question 1, pg 296 At the price of $60, Profits are maximized at Q=10 (where P is closest to MC without exceeding P) At the price of $50, Profits are maximized at Q=9. When the price falls from $60 to $50, profit falls from $190 to 95 Question 2, pg 296 As you see when FC increases, the firm still produces 10 units of output (Because the increase in FC does not change MC) Thus changes in FC does not influence the optimal quantity. It just reduces lower profits. Question 3, Pg 296 Q TR P=60 TC FC VC AVC MC 0 0 100 100 0 - 0 1 60 150 100 50 50 50 2 120 178 100 78 39 28 3 180 198 100 98 32.67 20 4 240 212 100 112 28 14 5 300 230 100 130 26 18 6 360 250 100 150 25 20 7 420 272 100 172 24.57 22 8 480 310 100 210 26.25 38 9 540 355 100 255 28.33 45 10 600 410 100 310 31 55 11 660 475 100 375 34.09 65 Q TR P=60 TC Profits P=60 MC MR TC FC=150 Profit P=200 TC FC=200 Profit P=200 0 0 100 -100 - 0 150 -150 200 -200 1 60 150 -90 50 60 200 -140 250 -190 2 120 178 -58 28 60 228 -108 278 -158 3 180 198 -18 20 60 248 -68 298 -118 4 240 212 28 14 60 262 -22 312 -72 5 300 230 70 18 60 280 20 330 -30 6 360 250 110 20 60 300 60 350 10 7 420 272 148 22 60 322 98 372 48 8 480 310 170 38 60 360 120 410 70 9 540 355 185 45 60 405 135 455 85 10 600 410 190 55 60 460 140 510 90 11 660 475 185 65 60 525 135 575 85 Q TR P=60 TC Profits P=60 MC MR
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