QUESTION 9 Charlie has invented an ice-cream that never melts. As it is the firs
ID: 1142978 • Letter: Q
Question
QUESTION 9 Charlie has invented an ice-cream that never melts. As it is the first of its kind and currently hard to replicate, Charlie operates as a profit maximising monopolist. His marginal cost of production for each tub of ice cream is S18 per tutb Below is a table of potential prices he could charge for each tub of ice-cream and the corresponding quantities Price (S/tub 30 Quantity (tubs) 10 20 26 24 What is Charlie's proft-maximising quantity Answer to the nearest whole number of tubs (with no decimal places) QUESTION 10 Belinda owns a cake store in a small town and is the only business selling cakes. Her marginal cost is constant at $32 per cake. She currently charges $32 for each cake and aims to pronit maximise. Below is a table of potential prices Belinda could charge and the corresponding quantities. Price Quantity cakes) 38 100 103 116 32 Answer the following questions 1. What is Belindas marginal revenue at her current level of production when the price is $32 per cake? Answer to the nearest whole number (with no decimal places) 2. Al the current production level, should Beinda decrease or increase output to maximise pr 3. What would be her profit-maximising quantity of cakes? Answer to the nearest whole number (with no decimal places). Type D for Decrease or I for Increase.Explanation / Answer
(Question 9) Quantity = 40
Profit is maximized when Marginal revenue (MR) = Marginal cost (MC) = $18.
MR = Change in Total revenue (TR) / Change in quantity (Q) where TR = Price (P) x Q
When Q = 30, Price = $26 and TR = $26 x 30 = $780
When Q = 40, Price = $24 and TR = $24 x 40 = $960
MRQ=40 = $(960 - 780) / (40 - 30) = $180 / 10 = $18 = MC
(Question 10)
(1)
When P = $32, Q = 108, TR = $32 x 108 = $3456 & When P = $30, Q = 116 & TR = $30 x 116 = $3480
MR = $(3480 - 3456) / (116 - 108) = $24 / 8 = $3
(2) D
Since MR < MC ($3 < $32), firm is making a marginal loss which can be minimized by decreasing production.
(3) Profit-maximizing quantity = 70
When Q = 50, P = $46 & TR = $46 x 50 = $2300
When Q = 70, P = $42 & TR = $42 x 70 = $2940
MRQ=70 = $(2940 - 2300) / (70 - 50) = $640 / 20 = $32 = MC
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.