ajaz_eco_204_2012_2013_chapter_12_Long_Run_CMP_PP

# Eco 204 s ajaz hussain do not distribute therefore

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Unformatted text preview: al revenue is: ( () Note that ( )( ) ) . Therefore, () And as a result, case C is the solution. 19 ECO 204 Chapter 12: Practice Problems & Solutions for The Long Run Cost Minimization Problem in ECO 204 (this version 2012-2013) University of Toronto, Department of Economics (STG). ECO 204, S. Ajaz Hussain. Do not distribute. Therefore, Pepsi’s optimal output in fall/winter is: And, Pepsi’s optimal uniform price in fall/winter is: ( ) (c) Assume Pepsi’s actual capacity is 75% of the value you calculated in part (a). What is Pepsi’s optimal uniform price and output if the government requires Pepsi to behave “as if it is perfectly competitive” in spring/summer and fall/winter? State all assumptions, show all calculations, and derive all figures up to two decimal place. Answer In spring/summer, Pepsi’s capacity is: ( ) If Pepsi is required to behave “as if it is perfectly competitive”, then interior solution would imply However, Pepsi’s capacity in spring/summer is only possible. and Pepsi will try to produce as close to units as Therefore, Pepsi’s optimal output in spring/summer is: And, Pepsi’s optimal uniform price in spring/summer is: ( ) In fall/winter, Pepsi’s capacity is: ( ) If Pepsi is required to behave “as if it is perfectly competitive”, then interior solution would imply 20 ECO 204 Chapter 12: Practice Problems & Solutions for The Long Run Cost Minimization Problem in ECO 204 (this version 2012-2013) University of Toronto, Department of Economics (STG). ECO 204, S. Ajaz Hussain. Do not distribute. However, Pepsi’s capacity in fall/winter is only and Pepsi will try to produce as close to 40 units as possible. Therefore, Pepsi’s optimal output in fall/winter is: And, Pepsi’s optimal uniform price in fall/winter is: ( ) (12.6) Billy Bob Buggins (BBB) restaurant in Sudbury Ontario specializes in “Surf and Turf cuisine”2. BBB offers customers the choice of having surf and turf (for example, a lobster tail and steak), or just surf (for example, a lobster tail), or just turf (for example, a steak). Letting “surf” (seafood) be good 1 and “turf” (red meat) be good 2. BBB prepares a target output surf plates by using...
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