Calculate the Profit-Maximizing Price
Economics
To calculate the profit-maximizing price and output level of the firm, the paper starts from price $10 to $200. The paper uses the Excel software to calculate the quantity, revenue, marginal revenue, variable costs, total costs and marginal costs. The fixed costs of the firm are $120, which does not change no matter the level of quantity produced.
However, the variable costs decline with the increase in the quantity produced. The marginal costs remain the same.
Based on the calculation in the Table 1, the profit-maximizing price is $120, which is the price the marginal revenue reaches its peak at $2,590. The increase in production at this level will make the marginal revenue to decline from $2,590 to ($2,410) as being revealed in the Table 1. As the firm increases the production, the total revenue increases, however, when the total revenue reaches $361,080, this is the point marginal revenue reaches its maximum. Increase in further production will make the marginal revenue to decline further. (Mankiw, 2011).
Table 1: All in U.S.$ Except Quantity
TC= FC+VC
Price ($)
Quantity
Total Revenue
Marginal Revenue
Fixed Costs
Variable Costs
Total costs
Marginal
on the MC, D and MR in the curves below in the Fig 1, the equilibrium point is where the marginal revenue cut the quantity from below. At the equilibrium point, the marginal revenue is $2, 590 and the quantity is 3,009 while marginal cost is $624,875
(ii) The profits that the firm will make this year is TC-TR=Profit. Based on the data in the table, the company will not make profit this year because the Total costs are higher than the total revenue no matter the quantity the firm produced.
(iii). The company might increase its profit level in the next year if the firm decrease its total costs of production.
Fig 1: MC, D, MR Curves
2a.Demand curves for GGC's product in the Western Market
Q = 5,013.824-0.25P
P = 20,055.296 -- 4Q,
Q = 5,013.824-0.25(1,995)
Q= 5,013.824 -- 498.75
Q=4515.07
P = 20,055.296 -- 4(4515.07)
P=20,055.296-18060.28
P=1995.01
Substitute Eq 1 and Eq 11
1995 = 20,055.296 -- 4Q,
1995-20,055.296=-4Q
4Q=20,055.296-1995
Q=4515.07
1995 = 20,055.296 -- 4Q,
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