ST 2.1 (Page 43 in Text Book): Profit vs Revenue Maximization Presto Products, Inc. recently introduced an innovative new frozen dessert maker with the following revenue and cost relations. P = $60 – $0.005QTC = $88,000 + $5Q + 0.0005Q2

A.Setup a spreadsheet for output (Q), price (P), total revenue (TR), marginal revenue (MR), total cost (TC), marginal cost (MC), total profit (π), and marginal profit (Mπ). Establish a range for Q from 0 to 10,000 in increments of 1,000 (i.e. 0, 1000, 2000, …, 10,000). Presto Products

B.Use the spreadsheet to create a graph with TR, TC and π as dependent variables, and units of output (Q) as the independent variable. At what price-output combination is total profit maximized? At what price-output combination is total revenue maximized?

Total profit is maximized at a price-output combination of P = $35 and Q = 5000. MR = MC and the total profit is maximized at $49,000.

Total revenue is maximized at a price-output combination of P = $30 and Q = 6000. MR = 0 and total revenue is maximized at $180,000.

C.Determine these profit-maximizing and revenue-maximizing price-output combinations analytically. In other words, use the profit and revenue equations to confirm your answers to part B. Profit-Maximizing:

Solve Q at MR = MC
60 – 0.01Q = 5 + 0.001Q
0.011Q –...

...ensure that buyers and sellers have reliable information.
True / False | 2.00pts
Your Answer : True
Correct Answer : True
The Choices Were:
• True
• False
________________________________________
Correct Answer
Public goods are not subject to the exclusion principle.
True / False | 2.00pts
Your Answer : True
Correct Answer : True
The Choices Were:
• True
• False
________________________________________
Correct Answer
A spillover effect is a cost or benefit imposed on someone other than the actual consumers.
True / False | 2.00pts
Your Answer : True
Correct Answer : True
The Choices Were:
• True
• False
________________________________________
Correct Answer
To help correct for the problem of economic inequality in a market economy, the government provides transfer payment programs for people in need such as unemployment compensation and food stamps.
True / False | 2.00pts
Your Answer : True
Correct Answer : True
The Choices Were:
• True
• False
________________________________________
Correct Answer
Among the business practices outlawed by the Clayton Act are interlocking directorates, price discrimination, and tying contracts that substantially lessen competition.
True / False | 2.00pts
Your Answer : True
Correct Answer : True
The Choices Were:
• True
• False
________________________________________
Correct Answer
Antitrust policy is an attempt to promote a...

...baseball team, have enjoyed a surge in popularity. During a recent home stand, suppose the club offered $5 off the $12 regular price of reserved seats, and sales spurted from 3,200 to 5,200 tickets per game.
A. Derive the function that describes the price/output relation with price expressed as a function of quantity (tickets sold). Also express tickets sold as a function of price.
B. Use the information derived in part A to calculate total revenues at prices in $1 increments from $5 to $15 per ticket. What is the revenue-maximizing ticket price? If variable costs are negligible, is this amount also the profit-maximizing ticket price?
P2.6 SOLUTION
A. When a linear demand curve is written as:
P = a + bQ
a is the intercept and b is the slope coefficient. Because 3,200 seats were sold at a regular price of $12 per game, and 5,200 seats were sold at the discount price of $7, two points on the firm’s linear demand curve are identified. Given this information, it is possible to identify the linear demand curve by solving the system of two equations with two unknowns, a and b:
12 = a + b(3,200)
minus 7 = a + b(5,200)
5 = -2,000 b
b = -0.0025
By substitution, if b = -0.0025, then:
12 = a + b(3,200)
12 = a - 0.0025(3,200)
12 = a - 8...

...THE FIRM’S BASIC PROFIT MAXIMIZATION PROBLEM
Chapter 2 slide 1
What Quantity of Output should the Firm Produce and Sell and at What Price?
The Answer depends on Revenue and Cost Predictions. The Solution is Found using Marginal Analysis.
Expand an Activity if and only if the Extra Benefit exceeds the Extra Cost.
MAXIMIZING PROFIT FROM MICROCHIPS
2.2 A1. Focus on a single Product, A2. whose Revenues and Costs can be predicted with Certainty. Revenue can be predicted using the Demand Curve. P = 170 - 20Q or equivalently, Q = 8.5 - .05P
Write profit as = R - C
Price ($ 000) 170
130
90
50
Quantity in Lots
0
2
4
6
8
THE FIRM’S OPTIMAL OUTPUT DECISION
R, C
The Firm determines Output where MR = MC.
2.3
C = 100 + 38Q
300 200 100 0 M = 0 R = 170Q - Q2
-100
0 2
3.3
4
6
8
Q
MAXIMIZING PROFIT ALGEBRAIC SOLUTIONS
2.4
Start with Demand and Cost Information
P = 170 - 20Q and C = 100 + 38Q
Therefore, R = 170Q - 20Q2
so MR = 170 - 40Q and MC = 38
Setting MR = MC implies 170- 40Q = 38 or 132 = 40Q Q* = 132/40 = 3.3 lots P* = 170 - (20)(3.3) = $104 K
* = 343.2 - 225.4 = 117.8
MAXIMIZING PROFIT USING MARGINAL GRAPHS Set MR = MC.
170
2.5
There is always a tradeoff.
P* Maximum Contribution
38
Demand MC MR Q*
SENSITIVITY ANALYSIS
2.6
Considers changes in: Fixed Costs, Marginal costs, or Demand...

...Consider the Concepts of the Science of ManagerialEconomics
Running successful businesses requires involvement of well experienced and talented managers; all companies’ stakeholders concern, in running companies, is to make profits and expectation is on managers’ part to make such desire become the fact of reality. One of the tools managers use to analyse company’s performances and be able to make intelligent decisions- for further profitability and sustainability of the corporations- is by economical tool. “managerialeconomics provides a systematic, logical way of analyzing business decisions that focuses on the economic forces that shape both day-to-day decisions and long-run planning decisions” (Thomas, & Maurice, 2011, p. 30).
As stated by Thomas, & Maurice, managerialeconomics is the result of two fundamental “areas of economic theory”, namely microeconomics and industrial organization (2011, p. 5). “Microeconomics is the study and analysis of the behavior of individual segments of the economy: individual consumers, workers and owners of resources, individual firms, indus-
tries, and markets for goods and services.” (Thomas, & Maurice, 2011, p. 6). Hence, in microeconomics we are dealing wih essesntially every goods and services bought and sold I the market; hence an important feature of microecomnomics is the supply and demand function of the...

...103-ManagerialEconomics
OBJECTIVES:
The course in ManagerialEconomics attempts to build a strong theoretical foundation for Management students. The course is mainly analytical in nature and focuses on clarifying fundamental concepts from microeconomic viewpoint. The students are expected to study and analyses the dynamics of managerial decision making through this course. Also wherever possible, students are expected to study, analyses and interpret empirical evidence and case studies available currently on various basic concepts.
1. Definition, Nature and Scope of ManagerialEconomics, ManagerialEconomics and Microeconomic and Macroeconomics. ManagerialEconomics and decision-making. Definitions of basic concepts:
a. Positive and normative approach
b. Optimization
c. Marginal analysis
d. Opportunity Cost.
e. Economic Model.
f. Statics and Dynamics. (8)
2. Meaning and determinants of demand. Demand Function. Law of Demand, Market Demand, Elasticity of demand. Types of elasticity. Measurement of elasticity. Significance and uses of the elasticity. Methods of demand estimation. Demand forecasting. Forecasting of an established product. Forecasting of a new product. (8)
3. Production Function. Law of Variable Proportions. Law of supply. Elasticity of supply. Measurement...

...|ManagerialEconomics |
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|UNIT -I |
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|[Pick the date] |
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Concept of ManagerialEconomics
The discipline of managerialeconomics deals with aspects of economics and tools of analysis, which are employed by business enterprises for decision-making. Business and industrial enterprises have to undertake varied decisions that entail managerial issues and decisions. Decision-making can be delineated as a process where a particular course of action is chosen from a number of alternatives. This demands an unclouded perception of the technical and environmental conditions, which are integral to decision making. The decision maker must possess a thorough knowledge of aspects of economic theory and its tools of analysis. The basic...

...
MBA
MANAGERIALECONOMICS
Arcadia IMBA Module 2
University Wide Individual Assignment (UWIA)
12th July 2013
PROBLEM SET #1
1. Complete the following table and answer the accompanying questions.
a. At what level of the control variable are net benefits maximized?
Net Benefit is also profit. The formula for this is MB = MC. As seen in the table completed above, after applying the formula then net benefit is maximized where Q = 106.
b. What is the relation between marginal benefit and marginal cost at this level of the control variable?
Where marginal benefit is equal to marginal cost (MB = MC), net benefit is maximized
2. Arcadia recently instituted an in-house recycling program. The benefits of this program include not only the benefits to the environment of recycling but also the goodwill generated by Arcadia's leadership in this area. The costs of recycling include all of the energy, labor, and space required to do the recycling. Suppose these benefits and costs are given by
B(Q) = 100Q – 2Q2 and
C(Q) = 2Q
(Note that Marginal Benefit (MB) = 100 – 4Q, and Marginal Cost (MC) = 2.)
a. What level of Q maximizes the total benefits of recycling?
To maximize total benefit of recycling, marginal benefit must be equal to zero (MB = 0). At Q = 25, total benefits of recycling is maximized.
Reason: MB = 0 ...