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2 years ago

To maximize profits, a firm should continue to increase production of a good until?

1 answer:

7 0

To maximize profits, a firm should continue to increase production of a good until marginal revenue is equal to marginal cost.

According to the cost-benefit analysis, a company should continue to increase production until marginal revenue is equal to marginal cost. A manager maximizes profit when the value of the last unit of product (marginal revenue) equals the cost of producing the last unit of production (marginal cost)

What Is Marginal Revenue?

Marginal revenue is the increase in revenue that results from the sale of one additional unit of output.

What Is Marginal Cost?

In economics, the marginal cost is the change in total production cost that comes from making or producing one additional unit.

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You have determined the following data for a given bond: Real risk-free rate (r*) = 3%; inflation premium = 8%; default risk pre

vagabundo [1.1K]

Answer: 16%

Explanation:

Interest rate on long term treasury securities is calculated below using following formula:

Interest rate = Real risk-free rate + inflation premium + default risk premium + liquidity premium + maturity risk premium

= 3% + 8% + 2% + 2% + 1%

= 16%

Interest rate on long term treasury securities is 16%.

4 0

4 years ago

EBike, an electronic bicycle manufacturer, has identified two customer segments, one is willing to pay a higher price for a cust

kramer

Solution:

Profit function of customised bicycle customers, P1 = d1*(p1-c)

= (11000-25p1)*(p1-160)

= 11000p1-1760000-25p1^2+4000p1

= -25p1^2+15000p1-1760000

In order to the profit maximizing price, equate the first order derivative of profit function to 0

dP1/dp1 = d(-25p1^2+15000p1-1760000)/dp1 = 0

=> -50p1+15000 = 0

=> p1 = 300

Profit function of price sensitive customers, P2 = d2*(p2-c)

= (11000-45p2)*(p2-160)

= 11000p2-1760000-45p2^2+7200p2

= -45p2^2+18200p2-1760000

In order to the profit maximizing price, equate the first order derivative of profit function to 0

dP2/dp2 = d(-45p2^2+18200p2-1760000)/dp2 = 0

=> -90p2+18200 = 0

=> p2 = 202.22

Price to be charged for customised segment = $ 300

Price to be charged for price sensitive segment = $ 202.22

------------------------------------------------------------

Considering single price, p

Total profit from both segments, P = (d1+d2)*(p-160)

= (11000-25p+11000-45p)*(p-160)

= (22000-70p)*(p-160)

= 22000p-3520000-70p^2+11200p

= -70p^2+33200p-3520000

In order to the profit maximizing price, equate the first order derivative of profit function to 0

dP/dp = d(-70p^2+33200p-3520000)/dp = 0

=> -140p+33200 = 0

=> p2 = 237.14

This is solved by Solver as follows:

[ Find the attachments ]

8 0

3 years ago

John has an economics test tomorrow. He must study and has planned the rest of his day so that he can fit some study time in. He

viktelen [127]

Answer:

C) John's decision on how to allocate his time is consistent with the rationality assumption since the decision is intended to make him better off.

Explanation:

One of the pillars of modern economic theory is that individuals are rational and they will try to maximize their benefit at the lowest possible cost. Since resources are finite, then all our decisions are made on the margin. What is the marginal benefit that we can obtain from purchasing something at its marginal cost (marginal cost = sales price for an individual).

In this case, John is trying to maximize his utility, first he will go to the gym which probably provides a larger benefit to him, and then he is going to study (which also provides a benefit). He could have chosen to either go out to somewhere else or just stayed home and watch TV, play videogames, etc., but apparently these activities do not provide him enough benefits but represent a large cost in time.

4 0

3 years ago

Roth Service Co. experienced the following transactions for 2018, its first year of operations: Provided $80,000 of services on

Stels [109]

Answer and Explanation:

a. The preparation of income statement is shown below:-

Income Statement

Service revenue $80,000

operating expenses

Salary expenses $28,000

Uncollectible accounts

expense $3,273

Total operating expense $31,273

Net income $48,727

Working Note :-

Days Amount Percentage Allowance balance

Current $16,800 0.01 $168

0-30 $5,100 0.05 $255

31-60 $4,000 0.10 $400

61-90 $2,000 0.30 $600

Over 90

days $3,700 0.50 $1,850

Total $31,600 $3,273

b. The computation of net realizable value of the accounts receivable is shown below:-

Net realizable value = Accounts receivable - Allowance for doubtful accounts

= ($80,000 - $48,400) - $3,273

= $31,600 - $3,273

= $28,327

4 0

3 years ago

On January 1, 2019, Woodstock, Inc. purchased a machine costing $40,000. Woodstock also paid $1,000 for transportation and insta

irinina [24]

Answer:

annual depreciation expense = $6000

so correct option is d. $6,000

Explanation:

given data

machine costing = $40,000

transportation and installation = $1,000

useful life = 6 years

residual value = $5,000

to find out

How much is the annual depreciation expense

solution

we get here first Cost of machine that is

Cost = $40,000 + $1000

cost = $41000

so depreciable base will be here

Depreciable base = cost - residual value

Depreciable base = 41000 - 5000

Depreciable base = $36,000

so annual depreciation expense is

annual depreciation expense = $\frac{36000}{6}$

annual depreciation expense = $6000

so correct option is d. $6,000

3 0

3 years ago