Religious-pilgrimage system
Economics Review Problem Set 1 HRVA KFSC, Fall 2020
1. For the following data, determine and graph the values for total variable cost, total cost, total revenue, net revenue, and profit. Assume that the product will be manufactured for 4 years. Show what the production rate is that will maximize profits.
q (production rate)
AVC (average variable production cost)
S (sales price)
Production Investment
Advertising Investment
Total Variable Cost
Total Revenue
Total Production Cost
Net Revenue Profit
5 400 4000 20000 10000 10 300 3500 20000 10000 15 350 3000 20000 10000 20 320 2500 20000 10000 25 350 2000 20000 10000 30 400 1600 20000 10000 35 600 1200 20000 10000 40 900 800 20000 10000 45 1500 400 20000 10000 50 2000 0 20000 10000
Remember:
2. For the following total revenue functions, TR(q, 0) and TR(q, A1), and total variable cost functions, TC(q, 0) and TC(q, P1),
a. Draw the total cost function and net revenue function. b. Draw the minimum total cost function c. Draw the maximum net revenue function d. Show the investments levels and production rate that maximizes the profit. e. Show how much this profit is.
q
$
TVC(q, 0)
TVC(q, P1)
P1
TR(q, 0)
A1
TR(q, A1)
q*
2. For the following manufacturing firm with the following advertising and production investment abilities, determine
a. Draw the minimum total cost and maximum net revenue functions. b. Now determine what levels of investment and what level of
production rate will generate the highest level of profit.
q
$
TVC(q, 0)
TVC(q, P1)
P1
TR(q, 0)
A1
TR(q, A2)
P2
TVC(q, P2) TR(q, A1)
A2