An automobile repair shop charges the competitive market price of $16 per bike repaired. The firm's short-run total cost is given by STC(Q) = Q³/3. 1. What quantity should the firm produce if it wants to maximize its profit? 2. What is the maximized profit at the optimal level of quantity and the price of $16 ( round to two decimal points )? 3. Draw the shop's total revenue and total cost curves, and graph the total profit on the same diagram. Using your graph, label the point of profit-maximizing quantity and its profit level. 4. Suppose now the new price is P'. What is the profit-maximizing quantity as a function of P'. If the price increases by a factor of four (i.e. price = 4P'), how much does the profit-maximizing quantity increase?
An automobile repair shop charges the competitive market price of $16 per bike repaired. The firm's short-run total cost is given by STC(Q) = Q³/3. 1. What quantity should the firm produce if it wants to maximize its profit? 2. What is the maximized profit at the optimal level of quantity and the price of $16 ( round to two decimal points )? 3. Draw the shop's total revenue and total cost curves, and graph the total profit on the same diagram. Using your graph, label the point of profit-maximizing quantity and its profit level. 4. Suppose now the new price is P'. What is the profit-maximizing quantity as a function of P'. If the price increases by a factor of four (i.e. price = 4P'), how much does the profit-maximizing quantity increase?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Please solve only the fourth sub question. That is (4) only
Transcribed Image Text:An automobile repair shop charges the
competitive market price of $16 per bike
repaired. The firm's short-run total cost is given
by STC(Q) = Q³/3.
1. What quantity should the firm produce if it
wants to maximize its profit?
2. What is the maximized profit at the optimal
level of quantity and the price of $16 (
round to two decimal points )?
3. Draw the shop's total revenue and total cost
curves, and graph the total profit on the
same diagram. Using your graph, label the
point of profit-maximizing quantity and its
profit level.
4. Suppose now the new price is P'. What is
the profit-maximizing quantity as a function
of P'. If the price increases by a factor of
four (i.e. price = 4P'), how much does the
profit-maximizing quantity increase?
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