Reference no: EM132336468

Question

Given the TR equation TR = 100Q - 10Q^2 and the TC equation TC = 182 + 56Q

a) Calculate the level of quantity that maximizes profits

b) Calculate the profit at that quantity

c) Add 1 to the quantity you found in part a). Show that profit is indeed lower at this quantity.

d) Find the quantity at which the firm maximizes revenue.

e) Calculate the profit at this quantity. Is it higher or lower?

f) Suppose variable costs increase such that the new TC equation is TC = 182 + 60Q. Calculate the new profit maximizing quantity.

g) For many managers, there is a notion that when costs increase, the firm must sell more units to maintain profit levels. In part f), do we find that the profit maximizing level of output increases or decreases? What would happen if we followed the advice of the managers mentioned above and increased our quantity to a level higher than part a) using the Total Cost equation in part f)? Provide an example.