The El Dorado Star faces the demand and cost schedules shown in the spreadsheet
ID: 1223909 • Letter: T
Question
The El Dorado Star faces the demand and cost schedules shown in the spreadsheet below
El Dorado Star
(1)
(2)
(3)
Number of newspapers per day (Q)
P
Total cost per day (TC)
0
0
5,000
1,000
$6.00
5,200
2,000
$5.50
6,200
3,000
$5.00
7,250
4,000
$4.50
8,500
5,000
$4.00
10,000
6,000
$3.50
11,750
7,000
$3.00
13,750
8,000
$2.50
16,250
9,000
$2.00
19,500
2.50
a.Use the appropriate formulas to create two new columns 7 and 8 for total profit (PROF) and profit margin (PROFMARG), respectively.
b.The maximum profit El Dorado Star can earn is $_______. The maximum possible profit margin is $_______ per unit. Profit and profit margin _______ (are, are not) maximized at the same point on demand.
c.Total fixed cost for the El Dorado Star is $_______.
d.Create a new spreadsheet in which total fixed cost increases to $25,000. What price should the manager charge? How many papers should be sold in the short run? What should the owners of the Star do in the long run?
El Dorado Star
(1)
(2)
(3)
Number of newspapers per day (Q)
P
Total cost per day (TC)
0
0
5,000
1,000
$6.00
5,200
2,000
$5.50
6,200
3,000
$5.00
7,250
4,000
$4.50
8,500
5,000
$4.00
10,000
6,000
$3.50
11,750
7,000
$3.00
13,750
8,000
$2.50
16,250
9,000
$2.00
19,500
Explanation / Answer
Note:- Profit = (TR -TC) and Changes in profit = (MR - MC)
b. From the table above we can see the maximum profit EI Doraro can earn is $10,000 and the maximum profit margin is $ 5.8. Moreover, profit and profit margin are not maximized at the same point on demand.
c. Total fixed cost for the EI Dorado star is $5000.
Q P TC TR Profit MR MC Changes in profit 0 0 5,000 0 -5,000 0 0 0 1,000 $6.00 5,200 6,000 800 6 0.2 5.8 2,000 $5.50 6,200 11,000 4,800 5 1 4 3,000 $5.00 7,250 15,000 7,750 4 1.05 2.95 4,000 $4.50 8,500 18,000 9,500 3 1.25 1.75 5,000 $4.00 10,000 20,000 10,000 2 1.5 0.5 6,000 $3.50 11,750 21,000 9,250 1 1.75 -0.75 7,000 $3.00 13,750 21,000 7,250 0 2 -2 8,000 $2.50 16,250 20,000 3,750 -1 2.5 -3.5 9,000 $2.00 19,500 18,000 -1,500 -2 3.25 -5.25Related Questions
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