Lesson_1_Assignment_4 - Shridhara Kollur :- Lesson #1,...

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Shridhara Kollur :- Lesson #1, Assignment #4 Average Cost Minimization . Better Buys, Inc., is a leading discount retailer of wide-screen digital and cable-ready plasma HDTVs. Revenue and cost relations for a popular 55-inch model are: TR = $4,500Q - $0.1Q 2 MR = ΔTR/ ΔQ = $4,500 - $0.2Q TC = $2,000,000 + $1,500Q + $0.5Q 2 MC = ΔTC/ ΔQ = $1,500 + $1Q A. Calculate output, marginal cost, average cost, price, and profit at the average cost-minimizing activity level. To find the average cost-minimizing level of output, set MC = AC and solve for Q. Since, AC = TC/Q = $2,000,000 + $1,500Q + $0.5Q 2 / Q = $2,000,000Q- 1 +$1,500+$0.5Q MC=AC, $1,500 + $1Q=$2,000,000Q- 1 +$1,500+$0.5Q 0.5Q=$2,000,000/Q Q*Q=$2,000,000/0.5 =4000000 Q=2000 MC=$1,500 + $1*2000=$1,500+$2,000=$3,500 AC=$2,000,000/$2,000+$1,500+$0.5*2000=$1,000++$1,500+1000=$3,500 P=TR/Q =$4,500Q - $0.1Q 2 /Q = $4,500-$0.1Q=$4,500-$0.1*2000=$4,300 TC=$2,000,000 + $1,500*2000+0.5*2000*2000=$2,000,000 +3000000+ $2000000=$7000000 Pi = P × Q – TC=$4,300*$2,000-$7000000=$8600000-$7000000=$1,600,000
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This note was uploaded on 04/18/2011 for the course ECON 101 taught by Professor Sam during the Spring '11 term at Bradford School of Business.

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Lesson_1_Assignment_4 - Shridhara Kollur :- Lesson #1,...

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