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are201fall09lab4key

# are201fall09lab4key - Calculate the revenues and profit for...

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Lab 4 Name _KEY____________________________ ARE 201, Fall 2009 1. Below are the total costs for each possible monthly production level of couches made by Tarheel Furniture Company. If Tarheel Furniture Company is a price-taker and the current price is \$400 per couch, calculate the revenues and profits for each production level. # couches total cost revenues profit made & sold 0 \$30,000 \$0 -\$30,000 100 \$50,000 \$40,000 -\$10,000 250 \$75,000 \$100,000 \$25,000 500 \$125,000 \$200,000 \$75,000 1000 \$350,000 \$400,000 \$50,000 What is the profit-maximizing production level (# couches)? 500 OVER

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2. Now let’s say Tarheel Furniture Company is a price-setter because buyers consider their couches to be different than competitors’ couches. So now Tarheel Furniture Company’s sales will be dependent on their price, as follows.
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Unformatted text preview: Calculate the revenues and profit for each production level. Price # couches total cost revenues profit made & sold-0 \$30,000 \$0 -\$30,000 \$550 100 \$50,000 \$55,000 \$5000 \$500 250 \$75,000 \$125,000 \$50,000 \$450 500 \$125,000 \$225,000 \$100,000 \$400 1000 \$350,000 \$400,000 \$50,000 What is the profit-maximizing production level of couches? 500 3. In the price-setter case (#2), what is the marginal cost and what is the marginal revenue in going from making 500 couches to making 1000 couches? Marginal cost: \$450 Marginal revenue: \$350 Based on your calculated marginal cost and marginal revenue, should Tarheel Furniture Company go from making 500 couches to 1000 couches (YES or NO)? ___ NO _______...
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