Q)Assume that a competitive firm has the total cost function: TC=1q^3−40q^2+740q+1600 Suppose the price of the firm's output (sold in integer units) is $650 per unit. Create tables (but do not use calculus) with columns representing cost, revenue, and profit to find a solution. A. How many units should the firm produce to maximize profit? B. What is the total profit at the optimal output level? Please specify your answer as an integer.
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Q)Assume that a competitive firm has the total cost function:
TC=1q^3−40q^2+740q+1600
Suppose the price of the firm's output (sold in integer units) is $650 per unit.
Create tables (but do not use calculus) with columns representing cost, revenue, and profit to find a solution.
A. How many units should the firm produce to maximize profit?
B. What is the total profit at the optimal output level? Please specify your answer as an integer.
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- TOTAL COST AND REVENUE (Dollars) -25 Suppose Lorenzo runs a small business that manufactures teddy bears. Assume that the market for teddy bears is a price-taker market, and the market price is $10 per teddy bear. The following graph shows Lorenzo's total cost curve. Use the blue points (circle symbol) to plot total revenue, and the green points (triangle symbol) to plot profit for the first seven teddy bears that Lorenzo produces, including zero teddy bears. 125 Total Cost 100 Total Revenue 75 -50 1 2 5 6 QUANTITY (Teddy bears) Profit Calculate Lorenzo's marginal revenue and marginal cost for the first seven teddy bears he produces, and plot them on the following graph. Use the blue points (circle symbol) to plot marginal revenue and the orange points (square symbol) to plot marginal cost. ? COSTS AND REVENUE (Dollars per teddy bear) 2 3 5 QUANTITY (Teddy bears) Marginal Revenue Marginal Cost Lorenzo's profit is maximized when he produces teddy bears. When he does this, the marginal…For each price in the following table, calculate the firm's optimal quantity of units to produce, and determine the profit or loss if it produces at that quantity, using the data from the graph to identify its total variable cost. Assume that if the firm is indifferent between producing and shutting down, it will produce. (Hint: You can select the purple points [diamond symbols] on the graph to see precise information on average variable cost.) Price (Dollars per oven) 25.00 70.00 100.00 Quantity (Ovens) Total Revenue (Dollars) Fixed Cost (Dollars) 1,600,000 1,600,000 1,600,000 Variable Cost (Dollars) Profit (Dollars) If the firm shuts down, it must incur its fixed costs (FC) in the short run. In this case, the firm's fixed cost is $1,600,000 per day. In other words, if it shuts down, the firm would suffer losses of $1,600,000 per day until its fixed costs end (such as the expiration of a building lease). This firm's shutdown price-that is, the price below which it is optimal for the…FITnest is one of the few fitness centers serving the greater area. The gym has been open for 3 years. It charges a flat price of $25 per visit to its clients, and the firm’s current average cost of production is $10 per visit. (You may assume that average cost has the “traditional U-shape”.) a) The owners of the gym heard you are studying economics, and they want some advice on how they could possibly increase their profits through price discrimination, which is a concept they have heard of but do not know much about. Provide an explanation of what price discrimination is and give them an example of how they could use group pricing in their climbing gym business. Explain how group pricing works to increase their profit. b) Given the current situation in the market for fitness in the area, would you expect to see competitors enter or exit the market? Explain. c) Given the current market conditions, what would you predict to observe in the long run with respect to the demand for…
- Assume that a firm in a competitive market faces the following cost information. If the market price for this firm's product is $40, calculate the profit maximizing level of output for this firm using marginal analysis. It may help to create your own cost table and fill in columns for Marginal Cost and Average Total Cost based on the Total Cost information below. a.What is the level of profit for this firm at the profit maximizing output? b.To convince yourself that the quantity you found is indeed the profit maximizing quantity, try calculating what the profit would be at the next higher level of output. What did you find? c. What do you predict will happen in this market over the long run?The curves show the marginal cost (MC), average variable cost (AVC), marginal revenue (MR), and average total cost (ATC) curves for a firm that sells mid-range cars in a competitive market. Use the area tool to draw the area representing the firm's profit or loss, if the firm produces 6,000 cars. Your answer should be a rectangle drawn with four corners.Suppose that the market for microwave ovens is a competitive market. The following graph shows the daily cost curves of a firm operating in this market. PRICE (Dollars per oven) 100 90 80 70 40 30 20 10 0 0 5 0 MC ATC AVC 10 15 20 25 30 35 QUANTITY (Thousands of ovens) 40 45 50 (?)
- 5. Profit maximization and shutting down in the short run Suppose that the market for frying pans is a competitive market. The following graph shows the daily cost curves of a firm operating in this market. 100 90 80 70 ATC 60 40 30 20 AVC 10 MC 10 15 20 25 30 35 40 45 50 QUANTITY (Thousands of pans) PRICE (Dollars per pan)A firm currently produces 500 units at a price of $40. If it earns $1,500 profit, what must the average cost be? Note: The formula for Profit = Quantity X (Price - Average Cost) Provide your answer below:7. Assume that the marginal cost curve is given by mc(q) = 100 + 2q. (a) If the price is $160, what is the optimal production for the firm? What if the price is $120? (ignore the shut-down decision for this part) (b) Assuming that the market is cleared at $160 (no shortage/surplus). If the market demand is equal to 10,000 units of the product. How many firms are currently operating (n) in the market? (Hint: if the market clears qª = n x q°) (c) If the total cost curve is TC 256 + 100g + q², what's the average total cost curve? %3| what's the break-even price? (d) If the demand curve is given by qd = 8, 452 – p, what's the long-run equilibrium price, the equilibrium quantity and the long-run total number of firms (n) in the industry?
- Graphically show the relationship between the total fixed cost, the total variable cost, and the total cost. Draw a total cost curve and total revenue curve so that at some outputs that the firm takes losses, outputs where the firm makes unnecessary profits, and where the firm makes only necessary profits. Then, pick a point where the firm is taking losses and show on the graph, the firm’s total losses. Do the same for a point (an output level) where the firm may be making unnecessary profits.Suppose the firm achieves total revenue of $1,000 by selling 150 units while facing total costs of $900. If the firm produces and sells 151 units, its total revenue is $1,005, and its total costs are $950. Should the firm produce and sell the extra unit? Group of answer choices yes, since marginal profit is positive yes, since profits are positive no, since marginal profit is negative no, since marginal profit is positive You have recently learned that the company where you work is being sold for $1,000,000. The company's income statement indicates next year's profits of $30,000, which have yet to be paid out as dividends. Assuming the company will remain a "going concern" indefinitely and the interest rate will remain constant at 7%, at what (constant) rate does the owner believe that profits will grow? (Hint: the price the owner was willing to pay is the present value of the firm's future cash flows) Group of answer choices 6% 5% 4% 4.5%Suppose Larry runs a small business that manufactures shirts. Assume that the market for shirts is a price-taker market, and the market price is $10 per shirt. The following graph shows Larry's total cost curve. Use the blue points (circle symbol) to plot total revenue and the green points (triangle symbol) to plot profit for the first seven shirts that Larry produces, including zero shirts. 125 100 TOTAL COST AND REVENUE (Dollars) 25 ☐ Total Cost ☐ -50 0 1 2 3 4 5 6 7 8 QUANTITY (Shirts) Total Revenue A Profit (?) Calculate Larry's marginal revenue and marginal cost for the first seven shirts he produces and plot them on the following graph. Use the blue points (circle symbol) to plot marginal revenue and the orange points (square symbol) to plot marginal cost. 25 2 COSTS AND REVENUE (Dollars per shirt) 0 1 2 3 5 6 7 8 QUANTITY (Shirts) Marginal Revenue Marginal Cost Larry's profit is maximized when he produces is shirts. When he does this, the marginal cost of the previous shirt he…