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Written Assignment Unit 4

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46 views3 pages

Written Assignment Unit 4

Uploaded by

njieeliman
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Written Assignment Unit 4

Department of Computer Science, University of the People

ECON 1580-01 Introduction to Economics - AY2025-T1

Heba Sharaf

October 02, 2024

The firm demand curve: P = $500-10Q

Marginal Cost of the firm: = $100

No fixed Cost

a) If you want to maximize profit the marginal cost curve will intersect with marginal

revenue curve that is marginal revenue equals to marginal cost (MR=MC) (Rittenberg,

L., & Tregarthen, T. (2009).

Formula:

MR=MC

TR = P*Q i.e. 500-10(Q^2)

Now we need to find MR which is MR = 500-20Q

Next MR=MC in order to find Q:

500-20Q = 100

20Q= 500-100

20Q/20 = 400/20

Q=20

The firm is going to produce 20 units.

b) In order to find price, we need to find value of Q: P= 500 - 10=*20 that will give us

P= 500 – 200 = 300 The charge price will be $300

c) The formula to find profit is P = TR – TC, but we need to find total revenue and total

cost:
TR = Q * P i.e. 20 units * $300 = $6000 is the total revenue

To find total cost we say TC = TVC

TVC = AVC * Q = MC * Q

Now TC = MC * Q = 100 * 20 = $2000

To find profit we say P = TR – TC i.e. 6000 – 2000 = $4000

The profit per day will be $4000.

d) The $1000 will affect the price as it is fixed so the price will not change and the

output also will not change.

e) The tax is fixed so it not going to affect the output.

f) The $1000 will affect the profit of the firm since it is a fixed cost so we will have to

subtract the $1000 tax from the profit that is 4000 – 1000 = $3000 that is the profit the

firm will have now after tax.

g) The imposed $100 will change the marginal cost thus MC = 100 + 100 = 200 now

MR = MC will be

500 – 20Q = 200

20Q = 500 – 200 = 300/ 20 will give us 15 units per day.

To find the price we say P = 500 – (10*15) = 500 – 150 = $350 per unit that is what

the firm will charge.

h) To find profit maximization we say MC=MR.

MC was $100 so TC = MC * Q i.e. TC = 100 * 15 units = $1500

The output will be 1500 / 100 = 15 units

i) To find profit we say P = TR – TC i.e. 350*15 = $5250

P = 5250 – 3000 = $2250 that will be the new profit so the profit will be reduce.

References
Rittenberg, L., & Tregarthen, T. (2009). Principles of Economics. Flat World

Knowledge. https://open.lib.umn.edu/principleseconomics/

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