9. UYGULAMA DERS&Atilde; SORU VE CEVAPLARI

# 9. UYGULAMA DERSÃ SORU VE CEVAPLARI - Question 1 0...

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SD&ZY_2010-2011/9 ISL233-M İ KRO İ KT İ SAT-UYGULAMA DERS İ -9 13-14.12.2010 50. The following table contains information for a price taking competitive firm. Complete the table and determine the profit maximizing level of output (round your answer to the nearest whole number). Output Total Cost Marginal Cost Fixed Cost Average Cost Total Revenue Average Revenue Marginal Revenue 0 5 0 1 7 10 2 11 20 3 17 30 4 27 40 5 41 50 6 61 60 Solution: Output Total Cost Marginal Cost Fixed Cost Average Cost Total Revenue Average Revenue Marginal Revenue 0 5 5 0 1 7 2 5 7 10 10 10 2 11 4 5 5.5 20 10 10 3 17 6 5 6 30 10 10 4 27 10 5 7 40 10 10 5 41 14 5 8 50 10 10 6 61 20 5 10 60 10 10 The profit maximizing level of output is either 3 or 4. Note that at Q=4 the profit-maximizing condition MR=MC is satisfied. Since this problem is discrete, the profit at Q=3 happens to be the same as the profit at Q=4, so either of these answers is correct. 51. Homer's Boat Manufacturing cost function is: ( ) 4 75 10,240 128 = + C q q . The marginal cost function is: ( ) 3 75 . 32 = MC q q If Homer can sell all the boats he produces for \$1,200, what is his optimal output? Calculate Homer's profit or loss. Solution: The profit maximizing output level is where the market price equals marginal cost (providing the price exceeds the average variable cost). To determine the optimal output level, we need to first equate marginal cost to the market price. That is, ( ) 3 75 1,200 8. 32 = = = = MC q q P q The average variable cost at this output level is: ( ) ( ) ( ) 3 75 512 75 8 8 300. 128 128 = = = AVC Since ( ) 8 , > P AVC Homer will maximize profits at 8 units. Homer's profits are: ( ) ( ) ( ) 4 75 8 1,200 8 10,240 3,040. 128 = - = - + = - Pq C q π Homer will produce and make a loss as losing \$3,040 is better than not producing and losing \$10,240.

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SD&ZY_2010-2011/9 52. Sarah's Pretzel plant has the following short-run cost function: ( ) 3 3 2 , 50 , 1000 = + wq C q K K K where q is Sarah's output level, w is the cost of a labor hour, and K is the number of pretzel machines Sarah leases. Sarah's short-run marginal cost curve is ( ) 2 3 2 3 , . 100 = wq MC q K K At the moment, Sarah leases 10 pretzel machines, the cost of a labor hour is \$6.85, and she can sell all the output she produces at \$35 per unit. If the cost per labor hour rises to \$7.50, what happens to Sarah's optimal level of output and profits?
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## This note was uploaded on 02/01/2012 for the course ECON 101 taught by Professor Meonk during the Spring '11 term at Abu Dhabi University.

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9. UYGULAMA DERSÃ SORU VE CEVAPLARI - Question 1 0...

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