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MIDDLE EAST TECHNICAL UNIVERSITY FALL 2012

BA 2801 – MICROECONOMICS FOR BUSINESS
Dr. Danışoğlu

Homework #1
Due on Wednesday, October 31, 2012

1. Use the following equation to derive a demand schedule and to plot a demand curve. Discuss what types of products might exhibit this type of nonlinear demand curves.

Q = 100 P-0.4

2. Central Publishing Inc., has recently purchased a new printing machine that will allow it to publish new types of promotional material for advertising agencies. The following are the relevant revenue and cost relations:

P = \$90 - \$0.0075Q TC = \$132,000 + \$7.5Q + \$0.00075Q2

a. Fill in the blanks in the following table:

Quantity (Q)
Price (P)
Total Revenue (TR)
Marginal Revenue (MR)
Total Cost (TC)
Marginal Cost (MC)
Total Profit (π)
Marginal Profit (Mπ)
0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

b. Use the template below to create a graph of the TR, MR, TC, MC, π and M π with the monetary values on the Y-axis and units of output (Q) on the X axis. Mark on the graph the price/output combinations at which total profit is maximized, total revenue is maximized, and total cost is minimized.

c. Now, 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).

d. Compare the profit-maximizing and revenue-maximizing price/output combinations, and discuss any differences.

3. The Bilgisayar Shop on campus has been selling its word processing software Quickword during the last 10 months. Monthly sales and the price for Quickword are shown in the following table. Also shown are the prices for a competitive software and estimates of monthly family income.

Calculate the own price, cross

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