skip to Main Content
The smarter way
to do assignments.

Please note that this is just a preview of a school assignment posted on our website by one of our clients. If you need assistance with this question too, please click on the Order button at the bottom of the page to get started.

A firm faces the following average revenue (demand)
curve: P = 120- 0.02Q
where Q is weekly production and P is price, measured in cents per unit. The firm”s cost function is given by C = 60Q + 25,000.Assume that the firm maximizes profits.
a. What is the level of production, price, and total profit per week?
b. If the government decides to levy a tax of 14 cents per unit on this product, what will be the new level of production, price, and profit?
a. Profit maximisation is where , Marginal
cost = Marginal Revenue Marginal revenue is twice the slope of demand curve so, Original demand curve is = 120-0.02Q, so MR will be= 120-
0.04Q and MC is slope of total cost curve so total cost =
60Q 25000 So MC will be 60 Profit is when MR=MC So, 120-0.04Q=60 Therefore Q= 1500 , i.e Level of production = 1500 units Price = P = 120-0.02×1500 Price= 90 cents Profit= Total Revenue- Total Cost Total revenue= Price x Quantity ,= 90 x 1500= 135000 Total cost= 60Q 25000, = 60 x 1500 25000, =…

5000 Total profit= 135000-115000 Total Profit=
20000 b. With the
increase in the tax of 14 cents the MR will change ,i.e., New MR= 120-0.04Q-Tax(14) MR= 120-0.04Q-14 MC will remain same 60 Profit maximisation output= 120- 0.04Q-14= 60 Output will be Q= 1,150
units New price =
120-0.02×1150-14, = 83 cents Total Revenue= (83
x 1150)- ( 60 x 1150 25000)= 1450


Clicking on this button will take you to our custom assignment page. Here you can fill out all the additional details for this particular paper (grading rubric, academic style, number of sources etc), after which your paper will get assigned to a course-specific writer. If you have any issues/concerns, please don’t hesitate to contact our live support team or email us right away.

How It Works        |        About Us       |       Contact Us

© 2018 | Intelli Essays Homework Service®

Back To Top