Week 5 Team Assignments

# Week 5 Team Assignments - 70Q = 2100 Q = 30 700 10(30 400...

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Chapter 10 page 389 A. A firm has two factories, for which costs are given by: Factory #1 Factory #2 The firm faces the following demand curve: P= 700 - 5Q A. Average revenue curve (AR) = P= 700 - 5Q Marginal Revenue curve (MR) = P= 700 - 10Q Factory #1: Marginal Cost (MC) = Factory #2: Marginal Cost (MC) = On a diagram, draw the marginal cost curves for the two factories, the av marginal revenue curves, and the total marginal cost curve (i.e., the marg producing Q = Q 1 + Q 2 ). Indicate the profit-maximizing output for each fa output, and price. C 1 (Q 1 ) = 10Q 2 1 C 2 (Q 2 ) = 20Q 2 2 where Q is total output - i.e., Q = Q 1 + Q 2 C 1 (Q 1 ) = 10Q 2 1 Taking the first derivative with respect to Q C 1 (Q 1 )/Q = 20Q 1 C 2 (Q 2 ) = 20Q 2 2 Taking the first derivative with respect to Q C 2 (Q 2 )/Q = 40Q 2 Total Marginal Cost (MC T ) (MC 1 /20) + (MC 2 /40) ((2)(MC 1 )/((2)(20)) + (MC 2 /40) (2MC 1 )/(40) + (MC 2 /40) 3MC T /40 MC T = 40Q/3

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B. 40Q/3 = 700 - 10Q (3/1)(40Q/3) = 700 - 10Q (3/1) 40Q = 2100 - 30Q

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Unformatted text preview: 70Q = 2100 Q = 30 700 - 10(30) 400 700 - (5) (30) 550 C. An increase in labor costin Factory 1 would shift everything to the left. Th a lower quanitity and higher marginal revenue. At a higher marginal reve Calculate the values of Q 1 , Q 2 , Q, and P that maximize profit. MC T = MR MR=MC T =MC 1 =MC 2 MC 1 400=20Q 1 Q 1 = 20 MC 2 400=40Q 2 Q 2 = 10 P M Suppose labor costs increase in Factory 1 but not in Factory 2. How sho or leave unchanged): Output in Factory 1? Output in Factory 2? Total o than the original level for MR. Since Q T falls and Q 2 rises, Q 1 must fall. S verage and rginal cost of actory, total he shift to the left would result in the nue the marginal cost of Factory two is greater ould the firm adjust the following(i.e., raise, lower, utput? Price? Since Q T falls , price must rise....
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## This note was uploaded on 03/25/2010 for the course MBAC 6605 taught by Professor Smith during the Spring '10 term at Baylor.

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Week 5 Team Assignments - 70Q = 2100 Q = 30 700 10(30 400...

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