3. Judge Baylor, a profit maximizer, has just invented a new way to produce Osog

Question

3. Judge Baylor, a profit maximizer, has just invented a new way to produce Osogazwidzoes. His cost using the new production technique is Clal q(34 + (1/2)(a-12)2). (a) What is his fixed cost? (b) For each price, what is his quantity? (i.e. What is his supply curve? Give the formula and the range over which it applies.) (c) We are told that B.A. produces 30 units. The IRS wants to know how much B.A. is making in profits for tax purposes. You are the consultant. Assuming B.A. maximizes profits with the above costs, what are his profits?

Explanation / Answer

(a) Fixed cost would be 0 since there nothing independent to q in this equation.

C = q(34+(1/2)(q-12)2)

C = q(34+(1/2)(q2+144-24q))

C = q(34+(q2/2)+72-12q)

C = 34q+(q3/2)+72q-12q2

(b) The Supply Curve of Judge Baylor is the Marginal Cost curve, where P>=Average Variable Cost. Since the entire cost is the variable cost, the supply curve =

C = 34q+(q3/2)+72q-12q2

MC = dC/dq

MC = 34 + 3q2/2 + 72 - 24q

MC = 3q2/2 - 24q + 106 = Supply Curve = P

(c) Profits. Given that B.A produces 30 units i.e. q=30

Then the price will be

P = 3(30)2/2 - 24(30) + 106 = 736

The total cost will be

C = 34(30)+(303/2)+72(30)-12(30)2 = 5880

The Revenue be

Pxq = 736 x 30 = 22080

Thus the profit will be

Profit = Revenue - Cost = 22080 - 5880 = 16200

Related Questions

Navigate

• Browse (All)
• Browse 3
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.