A U.S. export-import shipping company operates a general cargo carrier service between New York and several western European ports. It hauls two major categories of freight: manufactured items (Q₁) and semimanufactured raw materials (Q₂). The demand functions for these two classes of goods are: P₁ = 200-Q₁ where Q₁ = tons of freight moved. The total cost function for the United States is TC=20+4(Q1 + Q2) What is the firm's total profit function? O 200Q1-Q₁² +80Q2-₂²-20 O 196Q1-Q₁²+76Q2 − Q2² O O 196Q1-Q₁² +76Q2-Q₂² - 20 P2= 80-Q2 199Q1-Q₁²+60Q2-Q₂²-20 The profit-maximizing levels of price and output for manufactured items are The profit-maximizing levels of price and output for semimanufactured raw materials are $ At these levels of output the marginal revenue in the manufactured items market is raw materials market is per ton and At these prices, the price elasticity of demand in the manufactured items market is semimanufactured raw materials market is (Hint: Ep = MR-p) per ton and tons, respectively. tons, respectively. and the marginal revenue in the semimanufactured What are the total profits if the company is effectively able to charge different prices in the two markets? $ and the the price elasticity of demand in the If the company is required by law to charge the same per-ton rate to all users, the new profit-maximizing level of price and output are ton and tons respectively. The total profits in this situation is $ per

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Chapter1: Making Economics Decisions

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A U.S. export-import shipping company operates a general cargo carrier service between New York and several western European ports. It hauls two
major categories of freight: manufactured items (Q₁) and semimanufactured raw materials (Q₂). The demand functions for these two classes of
goods are:
P₁
=
200 - Q₁
where Qi = tons of freight moved. The total cost function for the United States is
TC=20+4(Q1 + Q2)
What is the firm's total profit function?
200Q1-Q₁² +80Q2 − Q2² - 20
○ 196Q1 − Q₁² + 76Q2 − Q2²
2
P₂ = 80 - Q2
199Q1-Q₁² +60Q2 - Q₂² - 20
O 196Q1-Q₁² + 76Q2 - Q₂² - 20
The profit-maximizing levels of price and output for manufactured items are $
The profit-maximizing levels of price and output for semimanufactured raw materials are
$
At these levels of output the marginal revenue in the manufactured items market is $
raw materials market is $
per ton and
At these prices, the price elasticity of demand in the manufactured items market is
semimanufactured raw materials market is
(Hint: Ep
;)
P
MR-
per ton and
tons, respectively.
tons, respectively.
and the marginal revenue in the semimanufactured
What are the total profits if the company is effectively able to charge different prices in the two markets? $
and the the price elasticity of demand in the
$
If the company is required by law to charge the same per-ton rate to all users, the new profit-maximizing level of price and output are
ton and
tons respectively. The total profits in this situation is $
per

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At these levels of output the marginal revenue in the manufactured items market is

and the marginal revenue in the semimanufactured raw materials market is

At these prices, the price elasticity of demand in the manufactured items market is and the the price elasticity of demand in the semimanufactured raw materials market is . (Hint: ED=PMR−P��=�MR−�)

What are the total profits if the company is effectively able to charge different prices in the two markets?

If the company is required by law to charge the same per-ton rate to all users, the new profit-maximizing level of price and output are

per ton and

tons respectively. The total profits in this situation is

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