1. If profit is maximum at sales of 700 units, does the firm have no choice but to limit sales at this level? Explain your answer.
2. A business firm produces and sells a particular Variable cost is P30/unit. Selling price is P40 per unit. Fixed cost is P60,000.
a. What is the break-even quantity and break-even point? Show your solution.
3. A manager makes the statement that output should be expanded as long as average revenue exceeds average Does this strategy make sense? Explain.
4. Suppose that the steel firm’s costs are shown below: Complete the table and determine the optimal output to be
Price of steel P17 per unit.
|
Output (Q) |
TFC |
TVC |
TC |
MC |
TR |
MR |
|
|
0 |
500 |
0 |
|
|
|
|
|
|
1 |
500 |
50 |
|
|
|
|
|
|
2 |
500 |
90 |
|
|
|
|
|
|
3 |
500 |
140 |
|
|
|
|
|
|
4 |
500 |
200 |
|
|
|
|
|
| 5 | 500 | 270 |
|
|
|
|
|
|
6 |
500 |
350 |
|
|
|
|
|
|
7 |
500 |
450 |
|
|
|
|
|
|
8 |
500 |
600 |
|
|
|
|
|
|
9 |
500 |
800 |
|
|
|
|
|
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