Question

Suppose Tony's Corp. produces a differentiated commodity. The company has substantial control over the price of the product. The company's cost function is estimated to be TC = 200 - 20Q + Q2, where Q is the volume per day. The firm also has the following demand equation P = 60 - 2Q, where P represents the price per unit and Q the volume of daily sales.  

How much profit will the company make or how much loss will the company incur?

Answer 1

Suppose Tony's corp produus a differentiated commodity. Also the company has substantial control ovn the price of the producto Now, demand function is? P= 60-2Q Total revenue earned by Tony's corp will be? TRE PQ = 160-2Q) Q = 60Q - 202 Marginal revenue earned by Tony's corp will be! MR: dLTR) = 60-4Q Now, The compay's cost two - da nou dQ Te = 200-20Q TQ2 Now Marginal cost will be MC = diTC) = - 20+20 Now Profit manimising condition will be! - MR = MC 60- HQ - - 2072Q – 49-2Q = -20-60 =) - 6Q = - 80 = Q = 13,33 ucí Scanned with CamScanner

Low To tul revime will be - TR= 60Q - 2Q2 substitutining Q = 13.33 Waget? and to tal TR= 60X13133) - 2 (13.33) = ( 799.8 - 355.38) = 4*442) $ 444.42 cost will be TC= 200-208 +Q? Substituting Q = 13.33 we get? a) TC - 200- 20 ( 13.33) 1/ 13.33)? - (200 - 266.67 177.69) = $111.09 Hunce probit earned by the compay will be? T= Total reve mue - To stal (ost) CS Scanne f ( 444.72 - 111.01) - $ 333.63 CamScanner