9781118041581
A Simple Model of the Firm 37 also shows the graph of cost versus output. As the graph shows, in this simple example the firm’s ...
How were we able to graph the profit curve in Figure 2.5 so precisely? The graph was constructed from the following basic profit ...
Marginal Analysis 39 the marginal profit from a small (.1 lot) increase in output starting from 3.0 lots is $10,000 per lot. The ...
How can the decision maker use profit changes as signposts pointing toward the optimal output level? The answer is found by appl ...
Marginal Analysis 41 Maximum profit is attained at the output level at which marginal profit is zero (M0). A practical method ...
the marginal profit at Q 3.0 is $12 thousand per lot.^4 In turn, we can imme- diately determine the firm’s profit-maximizing le ...
Marginal Revenue and Marginal Cost 43 FIGURE 2.7 Total Profit and Marginal Profit The point of maximum total profit in part (a) ...
Marginal Revenue Marginal revenueis the amount of additional revenue that comes with a unit increase in output and sales. The ma ...
Marginal Revenue and Marginal Cost 45 Marginal Cost Marginal cost (MC)is the additional cost of producing an extra unit of outpu ...
FIGURE 2.8 Marginal Revenue and Marginal Cost In part (a), total profit is shown as the difference between total revenue and tot ...
Marginal Revenue and Marginal Cost 47 except for scale, is identical to Figure 2.5. (Note that, for any level of output, the fir ...
SENSITIVITY ANALYSIS As we saw in Chapter 1, sensitivity analysis addresses the basic question: How should the decision maker al ...
Sensitivity Analysis 49 FIGURE 2.9 Shifts in Marginal Revenue and Marginal Cost Part (b) depicts an increase in marginal cost as ...
INCREASED OVERHEAD Suppose the microchip manufacturer’s overhead costs (for the physical plant and administration) increase. Fix ...
Sensitivity Analysis 51 $114,000. The firm takes optimal advantage of the increase in demand by sell- ing a larger output (380 c ...
At the time, there was some second guessing as to whether the price cut to $189 made sense for the company—indeed whether the ma ...
Summary 53 of burgers sold rather than microchips.) We observe that the revenue-maximizing output is well past the franchisee’s ...
If economic conditions change, the firm’s optimal price and output will change according to the impact on its marginal revenues ...
Summary 55 Suppose a firm’s inverse demand curve is given by P 120 .5Q and its cost equation is C 420 60Q Q^2. a. Find ...
a. Determine OS’s profit-maximizing output and price for the accounting text. b. A rival publisher has raised the price of its b ...
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