Beta Industries manufactures floppy disks that consumers perceive as identical to those produced by numerous other manufacturers. Recently, Beta hired an econometrician to estimate its cost function for producing boxes of one dozen floppy disks. The estimated cost function is C = 20 + 2Q². a. What are the firm's fixed costs? b. What is the firm's marginal cost? Now suppose other firms in the market sell the product at a price of $10 c. How much should this firm charge for the product? d. What is the optimal level of output to maximize profits? e. How much profit will be earned? f. In the long run, should this firm continue to operate or shut down? Why?

Beta Industries manufactures floppy disks that consumers perceive as identical to those produced by numerous other manufacturers. Recently, Beta hired an econometrician to estimate its cost function for producing boxes of one dozen floppy disks. The estimated cost function is C = 20 + 2Q². a. What are the firm's fixed costs? b. What is the firm's marginal cost? Now suppose other firms in the market sell the product at a price of $10 c. How much should this firm charge for the product? d. What is the optimal level of output to maximize profits? e. How much profit will be earned? f. In the long run, should this firm continue to operate or shut down? Why?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

Beta Industries manufactures floppy disks that consumers perceive as identical to those produced by
numerous other manufacturers. Recently, Beta hired an econometrician to estimate its cost function for
producing boxes of one dozen floppy disks. The estimated cost function is C = 20 + 2Q².
a. What are the firm's fixed costs?
b. What is the firm's marginal cost?
Now suppose other firms in the market sell the product at a price of $10
c. How much should this firm charge for the product?
d. What is the optimal level of output to maximize profits?
e. How much profit will be earned?
f. In the long run, should this firm continue to operate or shut down? Why?

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Step 1: Define the term cost

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Step 2: Calculate the fixed cost

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Step 3: Calculate marginal cost

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Step 4: Calculate the price to charge

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Step 5: Calculate Optimal Level of Output to Maximize Profits

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Step 6: Calculate profit or loss

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Step 7: Determine Long-Run Decision

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