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Economics

Q. How would company profitability in toothpaste division be impacted by an expansion? Assess profit potential using marginal analysis.
It is assumed that toothpaste market is perfectly competitive and current price of a case of toothpaste is $42.00. Estimated its marginal cost function to be as follows: MC=.006Q.

1. How many cases of toothpaste should be produced in order to maximize profits?

2. What happens if it's decided to raise prices unilaterally in this toothpaste market?

3. What results from profit maximizing level of output if market price suddenly rose to $54 per case? Why output level changes?

4. Would company benefit by advertising in this perfectly competitive market?

5. What would happen to price of toothpaste, would it rise or fall? What would happen to profits company makers?

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Business Economics, Economics

Category:- Business Economics
Reference No.:- M9307690

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