FIN 615 Managerial Economics-quantity should the firm produce


Question 1

A) Suppose the demand model and cost function facing a firm is expressed as
P = 120 – 5Q
TC = 20 + 30Q + 2Q2

i. Calculate 
a. the profit maximizing equilibrium level of output that the perfectly competitive firm will produce
b. the price that the firm would charge
c. and the profit of the firm  

ii. Repeat the above calculations if the firm were to be in monopoly market

iii. Compare the results in (i) and (ii) above, and give reason for this.

Question 2

The short-run cost function of a manufacturer of electronics products is presented as follows: 

i) Fill in the columns in the table. As a profit-maximizing firm, at what quantity should the firm produce? Verify your answer with marginal reasoning.
ii) Plot the marginal revenue, marginal cost, and average total cost on a graph. Also identify the profit-maximizing quantity of output on the graph. 

Question 3

A) Choose a particular firm in a particular sector and critically analyse both the environmental and internal factors that could affect its performance in the last 3 years. From your knowledge of managerial economics, what can the firm do to improve both its economic and non-economic goals in that sector?  

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