Question

12. At the profit maximizing output, calculate Beth's profit: a. $100 b. $200 c. -$2.50 d. $40 5 13. Now suppose Beth's greedy father charges her to use the family lawn mower-$100 per week. Everything else is unchanged. How will this change affect the optimal number of acres to mow? a. b. c. Quantity will increase Quantity will decrease Quantity will remain unchanged 14. Suppose instead that Beth's father requires her to pay 50 percent of her weekly profits as a mower charge. How will this affect Beth's profit maximizing decision? a. Quantity will increase b. Quantity will decrease c. Quantity will remain unchanged 15. Suppose a firm has the following demand curve: q - 60-2P. Find the total revenue curve for the firm (hint, express TR as a function of q) a. TR 30-'/q b. TR-60-q c. TR-30q- q d. TR 60q-2q e. TR-30- q 16. Suppose that MR 30 -q and MC- 0.2q. What level of output should this firm choose to maximize profits? a. q 10 b. q 15 c. q 20 d. q 25 e. q 30

Answer 1

P = MC Z_0 = 0.2 g + 10 20 - 10 = 0.2 g 0.2 g = 10 g = 10/0.2 g = 50 (optimal quantity production condition) output to maximize profit. TR = p middot q TR = (20) (50) TR = 1000 TC = (0.1) (50)^2 + 10(50) + 50 TC = 250 + 500 + 50 TC = 800 Profit = TR - TC Profit = 1000 - 800 Profit = 200 So, the correct answer is an option (b) If Berth, father charges her to use the family lawn mower = $ low per week, this changes will not affect the optimal number of acre to mow, because the charge of b/w per week is fixed cost for Berth and fixed cost does not take into account in the calculation of optimal quantity. So, the correct answer is an option [c]. If Berth Father requires her to pay 50 percent of her weekly profit as a mower charge