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Cost Analysis and Profit Maximization | Microeconomics | Trường Đại học Quốc tế, Đại học Quốc gia Thành phố Hồ Chí Minh

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If the price is 100$, the firm should produce 7 units of output because in this situation, MC=P and the profit reach maximum, is 100$. Although producing 6 units of output also get 100% about profit, its revenue is only 600$<700$ ( 7 units of output). C, The profitable in the question b won’t exist in the long run because the firm doesn’t get long run equilibrium ( P=MC=ATCmin). Tài liệu được sưu tầm và soạn thảo dưới dạng file PDF để gửi tới các bạn cùng tham khảo, ôn tập đầy đủ kiến thức, chuẩn bị cho các buổi học thật tốt. Mời bạn đọc đón xem!

Môn: Microeconomics 635 tài liệu

Trường: Trường Đại học Quốc tế, Đại học Quốc gia Thành phố Hồ Chí Minh 1.9 K tài liệu

Tác giả:

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Exercise 1
A,
Output
Total
fixed
cost ($)
Total
variable
cost ($)
Total
cost ($)
Average
fixed
cost ($)
Average
variable
cost ($)
Average
cost ($)
Marginal
cost ($)
0
200
0
200
1
200
50
250
200
50
250
50
2
200
90
290
100
45
145
40
3
200
120
320
200/3
40
320/3
30
4
200
160
360
50
40
90
40
5
200
220
420
40
44
84
60
6
200
300
500
100/3
50
500/6
80
7
200
400
600
200/7
400/7
600/7
100
8
200
520
720
25
65
90
120
9
200
670
870
200/9
670/9
870/9
140
10
200
900
20
90
110
230
B,
If the price is 100$, the firm should produce 7 units of output because in this situation,
MC=P and the profit reach maximum, is 100$. Although producing 6 units of output also
get 100% about profit, its revenue is only 600$<700$ ( 7 units of output).
C,
The profitable in the question b won’t exist in the long run because the firm doesn’t get
long run equilibrium ( P=MC=ATC
min
)
Exercise 2 The price=21$
Q
Total
cost
($)
Total
revenue
($)
Marginal
cost ($)
Fixed
cost
($)
Variable
cost ($)
Average
variable
cost ($)
Average
fixed
cost ($)
Average
total
cost ($)
0
50
50
1
55
21
5
50
5
5
50
55
2
62
42
7
50
12
6
25
31
3
75
63
13
50
25
25/3
50/3
25
4
96
84
21
50
46
46/4
50/5
24
5
125
105
29
50
75
15
10
25
6
162
126
37
50
112
56/3
50/6
27
7
203
147
41
50
153
153/7
50/7
29
8
248
168
45
50
198
99/4
50/8
31
B, In order to maximize the profit, MC=P=21$ at Q*=4
P -96=-
max
=TR-TC=84 12
C, Because p=21 → AVCmin<P<ATCmin, so the firm should continue the production at
price p=21, if production continues the firm will cover a portion of the fixed costs.
Conversely, if the firm stops production, it will lose all fixed cost per unit of product.
Therefore, in both cases continue production or closing, the company will lose, but the
company will choose the option to continue production to minimize the loss, or in other
words make up for it get a portion of fixed costs spent.
Exercise 3
1. TR=8Q
MR=(TR)’=(8Q)’=8
2. MC=(TC)’=(Q
2
+2Q+4)’=2Q+2
FC= 4 because when Q=0, TC=4=FC => VC= Q
2
+2Q
AVC=
Q
2
+2Q
𝑄
= 𝑄 + 2
AFC=
4
𝑄
ATC=
Q
2
+2Q+4
𝑄
3. When MC=P=8, the firm profit maximizes.
We have 2Q+2=8 Q=3
P -2x3-4=5$
max
=TR-TC= 8x3 – 3
2
4. Find ATC
min
(ATC)’=
(
2Q+2 ×Q−Q −2𝑄−4
)
2
𝑄
2
=
𝑄
2
−4
𝑄
2
(ATC)’=0 when Q =2 or Q=-2 (unsuitable)
P=ATC
min
=6$ is break even price and Q=2 is break even quantity.
5. Because AVC min<P<ATC min (2<4<6) so the company should continue to
production to minimize total loss.

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Exercise 1 A, Output Total Total Total
Average Average Average Marginal fixed variable cost ($) fixed variable total cost ($) cost ($) cost ($) cost ($) cost ($) cost ($) 0 200 0 200 1 200 50 250 200 50 250 50 2 200 90 290 100 45 145 40 3 200 120 320 200/3 40 320/3 30 4 200 160 360 50 40 90 40 5 200 220 420 40 44 84 60 6 200 300 500 100/3 50 500/6 80 7 200 400 600 200/7 400/7 600/7 100 8 200 520 720 25 65 90 120 9 200 670 870 200/9 670/9 870/9 140 10 200 900 1100 20 90 110 230 B,
If the price is 100$, the firm should produce 7 units of output because in this situation,
MC=P and the profit reach maximum, is 100$. Although producing 6 units of output also
get 100% about profit, its revenue is only 600$<700$ ( 7 units of output). C,
The profitable in the question b won’t exist in the long run because the firm doesn’t get
long run equilibrium ( P=MC=ATCmin)
Exercise 2 The price=21$ Q Total Total
Marginal Fixed Variable Average Average Average cost revenue cost ($) cost cost ($) variable fixed total ($) ($) ($) cost ($)
cost ($) cost ($) 0 50 50 1 55 21 5 50 5 5 50 55 2 62 42 7 50 12 6 25 31 3 75 63 13 50 25 25/3 50/3 25 4 96 84 21 50 46 46/4 50/5 24 5 125 105 29 50 75 15 10 25 6 162 126 37 50 112 56/3 50/6 27 7 203 147 41 50 153 153/7 50/7 29 8 248 168 45 50 198 99/4 50/8 31
B, In order to maximize the profit, MC=P=21$ at Q*=4 Pmax=TR-TC=84-96=-12
C, Because p=21 → AVCmin

price p=21, if production continues the firm will cover a portion of the fixed costs.
Conversely, if the firm stops production, it will lose all fixed cost per unit of product.
Therefore, in both cases continue production or closing, the company will lose, but the
company will choose the option to continue production to minimize the loss, or in other
words make up for it get a portion of fixed costs spent. Exercise 3 1. TR=8Q MR=(TR)’=(8Q)’=8
2. MC=(TC)’=(Q2+2Q+4)’=2Q+2
FC= 4 because when Q=0, TC=4=FC => VC= Q2+2Q Q2+2Q AVC= = 𝑄 + 2 𝑄 4 AFC= 𝑄 Q2+2Q+4 ATC= 𝑄
3. When MC=P=8, the firm profit maximizes. We have 2Q+2=8  Q=3
Pmax=TR-TC= 8x3 – 32-2x3-4=5$ 4. Find ATCmin (2Q+2)×Q−Q2−2𝑄−4 (ATC)’= 𝑄2−4 = 𝑄2 𝑄2
(ATC)’=0 when Q =2 or Q=-2 (unsuitable)
P=ATCmin=6$ is break even price and Q=2 is break even quantity.
5. Because AVC min

production to minimize total loss.

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