You are given the following data for your firm, which sells high-capacity video
ID: 1116727 • Letter: Y
Question
You are given the following data for your firm, which sells high-capacity video MP3 players.
Which of the following represents the correct formulas for PP and MRMR in terms of QDQD?
Select one:
a. P=20+1000QDP=20+1000QD ; MR=40+1000QDMR=40+1000QD
b. P=100020QDP=100020QD ; MR=100040QDMR=100040QD
c. P=100010QDP=100010QD ; MR=1000QD20QD2MR=1000QD20QD2
d. P=500.05QDP=500.05QD ; MR=500.1QDMR=500.1QD
Which of the following equations is correct, based on the data above?
Select one:
a. ATC=Q23Q+536+1500QATC=Q23Q+536+1500Q
b. MC=0.5Q21.5Q+268MC=0.5Q21.5Q+268
c. AVC=Q33Q2+536Q+1500QAVC=Q33Q2+536Q+1500Q
d. AVC=Q29Q+536Q+1500
The profit-maximizing quantity occurs at _______ and the profit-maximizing price occurs at _________.
(Since MC is in terms of Q2Q2, solving with calculus and algebra can be messy. Your table should give an exact answer.)
Select one:
a. Q=8Q=8; P=$840P=$840
b. Q=12Q=12; P=$760P=$760
c. Q=6Q=6; P=$880P=$880
d. Q=14Q=14; P=$720
How much total profit would your firm earn if you set PP and QQ at their profit-maximizing levels?
Select one:
a. $840
b. $612
c. $6,108
d. $6,720
Describe the competitiveness of the market by calculating the Lerner index.
Select one:
a. 23.5%
b. 3.12%
c. 19.0%
d. 8.74%
Q P TC 0 $1,000 $1,500 2 $960 $2,568 4 $920 $3,660 6 $880 $4,824 8 $840 $6,108 10 $800 $7,560 12 $760 $9,228 14 $720 $11,160 16 $680 $13,404 18 $640 $16,008 20 $600 $19,020Explanation / Answer
Q
P
TC
P=100010QD
TR
MR
MR=1000QD20QD^2
Profit
MC
0
1000
1500
1000
0
-1500
2
960
2568
960
1920
960
1920
-648
534
4
920
3660
920
3680
880
3680
20
546
6
880
4824
880
5280
800
5280
456
582
8
840
6108
840
6720
720
6720
612
642
10
800
7560
800
8000
640
8000
440
726
12
760
9228
760
9120
560
9120
-108
834
14
720
11160
720
10080
480
10080
-1080
966
16
680
13404
680
10880
400
10880
-2524
1122
18
640
16008
640
11520
320
11520
-4488
1302
20
600
19020
600
12000
240
12000
-7020
1506
Correct formulas for P and MR in terms of QD
Option c. P=100010QD; MR=1000QD20QD^2
The profit-maximizing quantity occurs at 8 and the profit-maximizing price occurs at 840
Option a
a. Q=8; P=$840
Total profit at profit-maximizing levels
Option b. $612
The competitiveness of the market - the Lerner index
Option a. 23.5%
Formula = (P-MC)/P
=(840-642)/840
=23.57%
Q
P
TC
P=100010QD
TR
MR
MR=1000QD20QD^2
Profit
MC
0
1000
1500
1000
0
-1500
2
960
2568
960
1920
960
1920
-648
534
4
920
3660
920
3680
880
3680
20
546
6
880
4824
880
5280
800
5280
456
582
8
840
6108
840
6720
720
6720
612
642
10
800
7560
800
8000
640
8000
440
726
12
760
9228
760
9120
560
9120
-108
834
14
720
11160
720
10080
480
10080
-1080
966
16
680
13404
680
10880
400
10880
-2524
1122
18
640
16008
640
11520
320
11520
-4488
1302
20
600
19020
600
12000
240
12000
-7020
1506
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