Question

QUESTION ONE A. Suppose the marginal cost and marginal revenue (in ¢000) for a product produced by a company is estimated to be MC = q +35 MR = 560 + 22q-q? Where q is the quantity produced and the firm's break-even is 5 units per week You are Required to 1. determine the total cost and the total revenue function in terms of q. (6 marks) II. estimate the output at which profit is maximize (6 marks) III. calculate the maximum profit (3 marks) Page 1 of 3 B. KK ltd produces goods for sale. From trend analysis the management accountant established a demand function of the product to be P = 40 - 1.59, where P is the unit selling price and q is the quantity in thousands. The enterprise has been producing under the cost TC = q* + 109 + 50, where TC is the total cost in thousands of cedis. Required What is the optimal price to maximize profit? (5 marks) Determine the maximum profit and the sale revenue at this point. (6 marks) At what quantity does the firm break even? (6 marks) Calculate the price elasticity of demand at the point and explain your answer (8 marks) (Total: 40 marks) 1. II. III. IV.

Answer 1

9) 1.) MC= 9+35, MR=5604829 92 TC=SMC dq = {(235)da 92+ 350 TR= SMR da {(560+229 -q2) da 56094 2993 q/ 2 TR = 560 + 13 - T = 942 + 859 it) FB - TC. or MR= MC a 560 +999-92-9735 525=q²-219 9+(214, -525 q=35.704 100) π = TR-TC 560 q +1192-q3/3 - 9212-359 put q = 35.704 ñ = 16958.214

B) 0 P= 40-1-592 TC=q² +109+50. MR = 40-39 MC= 2q to at optimal in Level, MR=Mc 40-39 = 29+10 30 = 59, q=6, p=40-10586 = 31 $ And - ñ= pq - TO 6X31) -( 36+60+50) = 40. Sales Revenue p q = 6X31= 186 11 firm will break even of in zo P q =q2+109+50 409-105q2 = 92 to q + 50 309,- 2.592 -50. 80 9 = 2 810 And

V) pruce elasticity,e- pla) (dQ/AP) Chaos (4 07:59) q at q=2 e 40-3) (-15) -12.33 2 at q=10, e= 25 (-V1.5) -1.667