This exercise deals with the case where price is not a constant but related to quantity...

This exercise deals with the case where price is not a constant but related to quantity demanded. The demand (price) function is P = 50 − 2.5Q, where Q is the quantity demanded. The revenue function is

TR = QxP =50Q -2.5Q²

and the total cost function is

TC = 25+25Q.

Using Excel, develop a table showing columns for Q, P, TR, TC, and Profit (TR-TC). Graph the total cost and total revenue functions at the values of Q: 0, 1, 2, 3, 4, 5, 6, 7, 8, and 9. Indicate approximately on the graph the break-even output levels where total cost equals total revenue. Distinguish between these two output levels.

Solutions

Expert Solution

Q	P	TR	TC	Profit
0	50	0	25	-25
1	47.5	47.5	50	-2.5
2	45	90	75	15
3	42.5	127.5	100	27.5
4	40	160	125	35
5	37.5	187.5	150	37.5
6	35	210	175	35
7	32.5	227.5	200	27.5
8	30	240	225	15
9	27.5	247.5	250	-2.5

Equilibrium quantity is 1.13 where TC=TR

TC is linearly related with the quantity whereas TR is non linearly related with the quantity.

Rahul Sunny answered 1 year ago

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