Question 1: 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

ENGR.ECONOMIC ANALYSIS
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Author:NEWNAN
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Chapter1: Making Economics Decisions
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Question 1:
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?
Transcribed Image Text:Question 1: 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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