Ecp 3703 Managerial Economics Homework

We know,AC = TC/QTC = Q*AC = 3Q+4Q2The firm is said to have a fixed cost if at Q =0, TC > 0.Here we can see that at Q =0, TC = 0 thus the firm does not have any fixed cost.If the price is $3 per pound then then revenue function is,R = P*Q = 3QWhich gives the profit function as,Profit = R – TC = 3Q – 3Q-4Q2 = -4Q2As -4Q2 can’t be positive thus the firm is making loss.We know,MC = dTCdQSo here,MC = dTCdQ=d(3Q+4Q2)dQ= 3 + 8QHere the degrees if economies of scope is= Cost to produce 1,000 wood cabinets +Cost to produce 500 wood desks-Cost to produce 1,000 wood cabinets and 500 wood desksCost to produce 1,000 wood cabinets and 500 wood desks = 23000+11000-3000030000=215 We know that the optimal output rate is where MC =P.Now,MC = dTCdQ=4+4QSo the optimal level is that level where,4+4Q = 24Q =5Hence the optimal level is 5 units of output.At this level,Total Revenue = 5*$24 = $120Total cost = 200+4*5+2*25 = $270So