Question

      Q                              P                      TC                               TR                     MR                   MC                 TP

(OUTPUT)                   (PRICE)                     (TOTAL COST)                                                    

0                                    10                               10                                                          NA                    NA

1                                    10                               20

2                                    10                               24

3                                    10                               30

4                                    10                               38

5                10                               48

6                                    10                               60

7                                    10                               90

COMPLETE THE TABLE:          (NOTE TR TOTAL REVENUE: MR MARGINAL COST; TP TOTAL PROFITS)

PLEASE SHOW ME HOW YOU GET THE RESULT DONT JUST WRITE THE ANSWERS.

2. By using profit maximizing condition (you should use MR and MC ) identify the output level at which total profits are maximized.

PART2

                                              GOOGLE($)             APPLE($)                       MICROSOFT($)

sales                                       50005                                 5725                                        3050

wages and salaries           29052                                 3932                                         400

cost of capital                           4000                                 1050                                          330

interest on debt                      7585                                   275                                             5

cost of materials                        6500                                   556                                          1650

(NOTE: COST OF CAPITAL > COST OF EQUITY CAPITAL)

3. CALCULATE accounting profit and economic profit for each of the firms.

4. list name of firm(s)which earn(s) more than normal profit.

Answer 1

1.

Q	P	TC	TR=(P)(Q)	MR=Change in TR	MC= Change in TC	TP= TR-TC
0	10	10	0	-	-	0-10= -10
1	10	20	(1)(10)=10	10-0= 10	20-10= 10	10-20= -10
2	10	24	(2)(10)= 20	20-10= 10	24-20=4	20-24= -4
3	10	30	(3)(10)=30	30-20= 10	30-24=6	30-30=0
4	10	38	(4)(10)=40	40-30=10	38-30=8	40-38=2
5	10	48	(5)(10)=50	50-40=10	48-38=10	50-48=2
6	10	60	(6)(10)=60	60-50=10	60-48=12	60-60=0
7	10	90	(7)(10)=70	70-60=10	90-60=30	70-90= -20

Profit maximizing condition is when MR=MC. We can see from the above table that when Q=5 units ,MR=MC=10.Therefore, the profit maximizing output is 10 units.