Question

abc and xyz agree to maximize joint profits. However, while ABC produces the agreed upon amount, XYZ breaks the agreement and each produce 5 more than agreed upon, how much less profit does each make

Answer 1

Answer:

The answer is "$ 140".

Explanation:

The company produces the quantity MR = MC and if there is no quantity MR = MC, the amount throughout the case MR is just greater and closest to MC to maximize profit.

Here MR = marginal income and marginal cost =MC

MR =$\frac{Overall \ sales \ change}{Quantity\ shift}$

In the above table, we could see that the amount MR = MC = 8 isn't available. Thus it produces the amount where the MR

is only larger but nearest to MC.

25 unit MR =$\frac{TR \ change}{Quality \ change}$

$= [TR (when \ Q = 25) -TR \frac{(when \ Q = 20)]}{(25 - 20)}$

$= \frac{(450 - 400)}{5}= 10$

(Minimum and superior to MC)

MR of 30 units$=\frac{(480 – 450)}{(30–25)}=6$, similarly MR of 30 units.

Consequently, 25 units were produced and 12.5 units were produced.

Currently, XYZ breaks the agreement and produces three more so thus maximum quantity produced on a market = 25 + 5 = 30 and through the above table they see which if quantity = 30, price = 16.

XYZ produces 12.5 + 5 = 17.5 output from 30 units.

Cost Total = TVC + TFC

Total TVC = Total Cost for Variable TFC = Maximum Cost of TFC = 0.

If MC is stable, TVC = MC $\times$ Q = 8 $\times$ q, where Q = exposed to the real produced and XYZ produces 17.5 in this case.

Total expenditure (TC+) is TVC = TFC = 8 $\times$ 17.5.

Take control = TR - TC = TC = 16 $\times$ 17.5 - 8 $\times$ 17.5 = 150.

So the business XYZ is profiting = 140