Exam 2: Optimal Decisions Using Marginal Analysis

Assume that Turbo is a firm that produces two kinds of flash-memory drives. Its deluxe model has the inverse demand equation: P_D = 70 - .05Q_D, where QD is the number of units sold per week. For its economy model, the price equation is: P_E = 30 - .05Q_E. Turbo's marginal cost is $10 per unit for either drive, and it produces both on a single assembly line that has a maximum capacity of 875 drives per week. (a) Determine the profit-maximizing outputs and prices of the drives. (b) Suppose demand for the economy drive increases to: PE = 50 – .04QE. What are the profit-maximizing outputs and prices of the drives?

If a firm's profit is given by π = -150 + 360Q - 36Q², then its optimal output is:

The following table shows the total revenue and total cost (in dollars) from different sales volumes of the good. Table 2-1 Price Quantity Total Revenue Total Cost 15 1 15 3 14 2 28 7 13 3 39 12 12 4 48 18 11 5 55 25 10 6 60 33 -Refer to Table 2-1. What is the marginal profit of the firm from the sale of the 3rd unit of the good?

KopyKat is a firm that specializes in printing business cards and résumé's, using the latest laser technology. The manager has estimated that weekly demand can be approximated by P = 25 - .001Q, where P is price and Q is output per week. The firm's cost function is C = 25,000 + 13Q + .002Q², where C is total cost. (a) Determine the firm's profit maximizing price and output. (b) The night supervisor believes that extending KopyKat’s hours by two hours in the evening would substantially increase volume. The manager is willing to stay open for two hours over the next three months as an experiment. What results would lead the manager todecide if the store can remain open later in the evening on a permanent basis? (c) A former employee decides to sue KopyKat, alleging employment discrimination. Although management claims innocence, they agree to settle out of court. The settlementrequires KopyKat to pay the employee $10,000 per month for the next year. Determine the optimal price and output for the firm under these new conditions.

Suppose a firm's profit is given by the equation π = -200 + 80Q - .2Q². Which of the following is true?

A firm's demand curve is given by Q = 800 - 2P, where P = price and Q = quantity. Therefore, its inverse demand equation is: