Your company has estimated its total cost to be TC = 3500 + 0.05Q + 0.0008Q2; its marginal cost is thus MC = 0.05 + 0.0016Q, where Q is the quantity of units produced and TC is in dollars. Since your market is relatively competitive, your company is able to sell its output for $6.45 each (which thus yields MR = 6.45 and TR = 6.45Q). a. Produce a chart in Excel showing TC and TR with Q on the horizontal axis. Have Q go from 0 to 10,000 units. Produce a second chart showing MC and MR with Q again on the horizontal axis. b. What is the optimal level of output for your company to produce/sell? What is the marginal revenue from the last unit sold? c. What are the total revenue, total cost, and profit (net benefit/net revenue/etc.) from selling the optimal number of units? d. An eager intern at your company suggests that, since the company earns $6.45 revenue for each unit sold, then the company could make still more profit by selling more than the level chosen in part b; why would your company not want to produce and sell more output than the level you chose in part b?
Your company has estimated its total cost to be TC = 3500 + 0.05Q + 0.0008Q2; its marginal cost is thus MC = 0.05 + 0.0016Q, where Q is the quantity of units produced and TC is in dollars. Since your market is relatively competitive, your company is able to sell its output for $6.45 each (which thus yields MR = 6.45 and TR = 6.45Q).
a. Produce a chart in Excel showing TC and TR with Q on the horizontal axis. Have Q go from 0 to 10,000 units. Produce a second chart showing MC and MR with Q again on the horizontal axis.
b. What is the optimal level of output for your company to produce/sell? What is the marginal revenue from the last unit sold?
c. What are the total revenue, total cost, and profit (net benefit/net revenue/etc.) from selling the optimal number of units?
d. An eager intern at your company suggests that, since the company earns $6.45 revenue for each unit sold, then the company could make still more profit by selling more than the level chosen in part b; why would your company not want to produce and sell more output than the level you chose in part b?
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