Question A3 (15 marks) Bibi Mobile is the only authorized producer in producing smart phone in...

Question A3 Bibi Mobile is the only authorized producer in producing smart phone in Country X which is a small country. Its annual revenue is $4,000,000 and the average total cost per smart phone produced is $5,000. The marginal revenue function and the marginal cost functions are as below: Marginal Revenue function: MR = 12,000 - 10Q Marginal Cost function: MC = 2,000 + 15Q where Q represents quantity.

(a) Define the market structure of Bibi Mobile.

(b) State the profit maximization condition. According to this condition based on the given information, calculate the profit maximizing price and quantity of Bibi Mobile? What is the total profit (loss) earned by this company?

(c) Based on the given information and your answers in part (b), illustrate the situation with a diagram and label the critical data related to price, quantity, cost and profit (loss) condition in the diagram. No explanation is needed.

(d) Suppose there is an increase in the minimum wage in Country X and most of the workers are paid on this wage level in Bibi Mobile. Bibi Mobile has recorded a break-even state of profitability afterwards. Illustrate this situation in the same diagram of part (c). Explain.

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Rahul Sunny answered 1 year ago

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