The El Dorado Star is the only newspaper in El Dorado, New Mexico. Certainly, th
ID: 1215360 • Letter: T
Question
The El Dorado Star is the only newspaper in El Dorado, New Mexico. Certainly, the Star competes with The Wall Street Journal, USA Today, and the New York Times for national news reporting, but the Star offers readers stories of local interest, such as local news, weather, high-school sporting events, and so on. The El Dorado Star faces the revenue and cost schedules shown in the spreadsheet that follows:
You may download my template or create your own. Since we are using dollars and cents, be sure to go out two decimal places on your calculations. Add columns to show, respectively, marginal cost (MC), marginal revenue (MR), and total profit.
Number of newspapers per day (Q)
Total revenue (including advertising revenues) per day (TR)
Total cost per day (TC)
0
0
3500
1000
3250
3600
2000
4250
3700
3000
4750
3860
4000
5000
4020
5000
5200
4300
6000
5375
4500
7000
5400
4590
8000
5375
4810
9000
5225
5050
Please answer the following questions once the spread sheet is completed.
1. What is the value of MR when Q = 8,000?
2. What is the value of MC when Q = 8,000?
3. How many papers should the manager of the El Dorado Star print and sell daily? Explain your choice in 25 – 50 words.
4. How much profit (or loss) will the Star earn at the level of output you chose in #3?
5. At the profit-maximizing output level you reported in question 3, is the El Dorado Star making the greatest possible amount of TOTAL REVENUE? Explain in 50-100 words why or why not.
6. What is total fixed cost for Star?
7. If Star's total fixed costs were to DOUBLE for some reason, how much profit (or loss) does Star make when fixed costs are doubled?
8. Given your answer in #7, should the Star shut down, why or why not? If they should continue to produce, how many papers should they produce? Explain your choice in 25-50 words.
Number of newspapers per day (Q)
Total revenue (including advertising revenues) per day (TR)
Total cost per day (TC)
0
0
3500
1000
3250
3600
2000
4250
3700
3000
4750
3860
4000
5000
4020
5000
5200
4300
6000
5375
4500
7000
5400
4590
8000
5375
4810
9000
5225
5050
Explanation / Answer
1)When Q=8000 , MR is -25
2)When Q=8000, MC is 220
3)Produce at Q=4000
4)Profit is 980
5)Yes,he is
Number of newspapers per day (Q) Total revenue (including advertising revenues) per day (TR) Total cost per day (TC) MC MR PROFIT=TR-TC 0 0 3500 -3500 1000 3250 3600 100 3250 -350 2000 4250 3700 100 1000 550 3000 4750 3860 160 500 890 4000 5000 4020 160 250 980 5000 5200 4300 280 200 900 6000 5375 4500 200 175 875 7000 5400 4590 90 25 810 8000 5375 4810 220 -25 565 9000 5225 5050 240 -150 175Related Questions
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