06-02-2011, 03:27 AM
Assignment # 2
Question:
A firm operating in competitive environment faces the following price (P),quantity (Q), total fixed cost (TFC) and total variable cost (TVC) schedules respectively:
A. Calculate total revenue (TR), marginal revenue (MR), total cost (TC),marginal cost (MC) and profit (π
for each level of output (Q).
Solution:-
Q
P
TFC
TVC
TR
MR
TC
MC
π
400
2.5
150
750
1000
—
900
—
100
500
2.25
150
830
1125
1.25
980
0.8
145
600
2
150
905
1200
0.75
1055
0.75
145
700
1.75
150
995
1225
0.25
1145
0.9
80
B. Find the optimal level of output and price which maximizes firm’sprofit.
Answer:-
As we know that profit is maximized at the point where MC = MR. The optimal level of Output (Q) and Price (P) at which maximizes firm’s profit is 600 and 2.
Question:
A firm operating in competitive environment faces the following price (P),quantity (Q), total fixed cost (TFC) and total variable cost (TVC) schedules respectively:
A. Calculate total revenue (TR), marginal revenue (MR), total cost (TC),marginal cost (MC) and profit (π
for each level of output (Q).Solution:-
Q
P
TFC
TVC
TR
MR
TC
MC
π
400
2.5
150
750
1000
—
900
—
100
500
2.25
150
830
1125
1.25
980
0.8
145
600
2
150
905
1200
0.75
1055
0.75
145
700
1.75
150
995
1225
0.25
1145
0.9
80
B. Find the optimal level of output and price which maximizes firm’sprofit.
Answer:-
As we know that profit is maximized at the point where MC = MR. The optimal level of Output (Q) and Price (P) at which maximizes firm’s profit is 600 and 2.
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