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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This note was uploaded on 10/22/2009 for the course ARE 201 taught by Professor Eryuruk during the Fall '08 term at N.C. State.

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are201fall09lab4key - Calculate the revenues and profit for...

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