Profit Maximization is the process that a firm uses to establish where the best output and price levels are, in order to maximize its return. There are two primary methods that can be used to establish profit maximization. One method is the Marginal Revenue minus the Marginal Cost (MR-MC) method. When utilizing this method economists assume that profit would be at its highest when MR and MC are equal, which denotes that for every item made MP=MR-MC. When / if MR is higher than MC then MP would result in a profit for Company A.
Monopoly output: MR=400-4q MC=40 MR=MC 400 – 4q = 40 then q=90 unit The reason that producing on half the monopoly output (90*1.5 = 135) a Nash equilibrium outcome is that it will exceed the market demand of Nash equilibrium ($160). 4. Problem #8, p. 221-222 in text. (HINT: First calculate the profits of a market with two firms, and then continue this process for 3, 4, and 5 firms.) a.
What is correct here? 26 Which of the following is never negative? 27 If the marginal product of labor is 100 and the price of labor is 10, while the marginal product of capital is 200 and the price of capital is $30, then what should the firm? 28 In a production process, an excessive amount of the variable input relative to the fixed input is being used to produce the desired output. This statement is true for: 29 What method of inventory valuation should be used for economic decision-making problems?
Government legislation B. The product market c. The labor market d. Labor market competitors 6. (p. 195) Which of the following factors do not affect an employer's ability to pay high wages? a. product demand b. degree of competition c. productivity of labor D. All of these affect ability to pay 7. (p. 199) All of the following except ___________ is an important factor in defining a market for compensation purposes.
Find the MPL when L goes up from 100 to 110. Compare this result with the MPL for an increase in labour from 110 to 120. Does the marginal productivity of labour diminish? Question 6 (15 marks) There are a number of statistics computed to measure the price level, such as the GDP deflator and the CPI. The choice of which of these measures to use depends in many cases on the specific question in which you are interested.
After adding $15,300 to the $15,000 in savings, the cash flow for year 2 would equal $30,300. For year 3, the depreciation expense would equal $85,000 * .15, or $12,750. The tax on the year 3 deprecation would then be $12,750 * .40, which equals $5,100. After adding $5,100 to the $15,000 in savings, the cash flow for year 3 would equal
Ensure you state where a particular assumption is used in your proof. (600 points) [pic] Given the two IC Curves, Point A on IC1 is northeast of IC2’s Point B implying that IC1 is has a higher utility than IC2. On IC2, Point D is northeast to IC1’s Point C implying that IC2 is the IC curve with the higher utility, which creates a logical inconsistency. This would break the assumption rule that every consumption basket lies on one and only one indifference curve. It would also break the transitivity assumption.
------------------------------------------------- JAN 10 Section B Question 4 (b) Evaluate the argument that managers controlling large companies might follow policies which do not necessarily maximise the profits of the owners. 25 marks Kn Economic theory standardly assumes maximising behaviour on the part of economic agents. Consumers are assumed to maximise utility from consumption subject to their limited income, for example, while workers maximise income subject to the constraint of wanting leisure time. It is assumed that firms pursue profit maximisation, although a number of other maximising behaviours are possible in reality such as revenue maximisation or maximising the volume of sales, and these are sometimes thought likely to be pursued by the managers of large firms. It is also possible that managers do not adopt maximising behaviour at all, perhaps “satisficing” in response to shareholder discipline or that the policy of the firm is the result of complex interactions between various stakeholders.
Redo questions a, b, c, and d under these conditions. a. Total revenue | (100x7500) | | $750,000 | Total Var Cost | (25x7500) | | 187,500 | Total contribution margin | | $562,500 | Fixed Costs | | | 500,000 | Profit | | | $62,500 | b. Contribution margin: $75; breakeven point: Contribution margin x Volume=FC $75 x Volume = $500,000 Volume = 6,667 c. ($75 x Volume)-$500,000 = $100,000 $75 x Volume = $600,000 Volume = 8,000 ($75 x Volume)-$500,000 = $200,000 $75 x Volume = $700,000 Volume = 9,333 d. | | | | | | | | | | | | e. Total revenue | (80x7500) | | $600,000 | Total Var Cost | (25x7500) | | 187,500 | Total contribution margin | | $412,500 | Fixed Costs | | | 500,000
Define the price elasticity of demand and show how it is calculated. Answer: The units-free measure of the responsiveness of the quantity demanded of a good to a change in it s price when all other influences on buying plans remain the same. 3. What is the total revenue test? Explain how it works.