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Question 1: Define scarcity and opportunity cost. What role these two concepts play in the making of business decisions?

Question 2: What is Marginal Analysis? (b) Why Is Marginal Analysis Important in Economics? (c) What is the role of Marginal analysis?

Question 3. *Suppose a firm's inverse demand curve is given by P = 120 - .5Q, and its cost equation is C = 420 + 60Q + Q2.

(a)   Calculate Price (P), Total Revenue (TR), Marginal Revenue,(MR) Total Cost (TC), Marginal Cost (MC), Total Profit and Marginal Profit for Q =15...35. 

(b) Find the firm's optimal quantity, price, and profit

I. numerically (i.e., using the data in above table),

II. by using the profit and marginal profit equations and

III. by setting MR equal to MC. Also provide a graph of MR and MC. 

(c) Suppose instead that the firm can sell any and all of its output at the fixed market price P = 120. Find the firm's optimal output 

*The original revenue function for the microchip producer is R = 170Q - 20Q2. Derive the expression for marginal revenue, and use it to find the output level at which revenue is maximized. Confirm that this is greater than the firm's profit-maximizing output, and explain why. (Hint: Revenue is maximised when MR=0 and Profit is maximised when MP=0).

Microeconomics, Economics

  • Category:- Microeconomics
  • Reference No.:- M9433468
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