Kelson Electronics, a manufacturer of VCRs, estimates the following relation between its marginal cost of production and monthly output: MC = $150 + 0.005Q.
1) What does this function imply about the effect of the law of diminishing returns on Kelson's short-run function?
2) Calculate the marginal cost of production at 1,500, 2,000, and 3,500 units of output.
3) Assume Kelson operates as a price taker in a competitive market. What is this firm's profit-maximizing level of output if the market price is $175?
4) Compute Kelson's short-run supply curve for its product.
Kelson Electronics, a manufacturer of VCRs, estimates the following relation between its marginal cost of production and monthly output: MC = $150 + 0.005Q.
1) What does this function imply about the effect of the law of diminishing returns on Kelson's short-run function?
2) Calculate the marginal cost of production at 1,500, 2,000, and 3,500 units of output.
3) Assume Kelson operates as a price taker in a competitive market. What is this firm's profit-maximizing level of output if the market price is $175?
4) Compute Kelson's short-run supply curve for its product.
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Related questions
Assume that a firm in a perfectly competitive market can sell its product for $35 (ie price per unit of output). Furthermore, it faces the following costs:
| Output (Q) | Total Cost |
| 0 | 25 |
| 1 | 50 |
| 2 | 100 |
| 3 | 120 |
| 4 | 155 |
| 5 | 190 |
| 6 | 250 |
| 7 | 390 |
a) Calculate Total revenue (TR), Marginal Cost (MC), Fixed Cost (FC), Variable cost (VC), and Average Cost (AC).
b) What is the profit-maximizing output level?
c) Is this firm is making a profit or loss at the profit-maximizing output level? Explain.
d) Do you think the firm will continue its production in the short run?
e) What will be the long-run price in this market?
The following table represents short run cost-revenue information (in dollars) for a firm in a competitive market.
|
Q |
P |
TR |
MR |
MC |
TC |
Total Profit |
|
0 |
N/A |
N/A |
600 |
|||
|
1 |
700 |
|||||
|
2 |
80 |
|||||
|
3 |
50 |
|||||
|
4 |
860 |
|||||
|
5 |
20 |
|||||
|
6 |
1000 |
|||||
|
7 |
1040 |
|||||
|
8 |
60 |
|||||
|
9 |
||||||
|
10 |
(a) Fill in all the blanks above using the following information: The Market Price is $100 per unit of output, the VC of producing 9 units of output is $570, and the ATC of producing 10 units of output is $270
(b) Where does diminishing returns start? Explain your answer.
(c) What is the Fixed Costs for this firm? Explain your answer.
(d) In the Short Run, if this firm would go into production, determine the profit maximizing (or loss minimizing) level of output and profit amount.
(e) In the Short Run, if this firm would instead shutdown without going into production, determine its production amount and profit amount.
(f) Please determine the best course of action for this firm in the Short Run.
(g) Based on the data above, in the Long Run, explain what this firm should do.
