Question
In: Economics
Alpha Electronics is a profit-maximizing firm and it can produce any one of the following three...
Alpha Electronics is a profit-maximizing firm and it can produce any one of the following three combinations of HD TV sets per production run, operating at capacity. Its total cost per production run is $1,500. The market price for the Large Screen, Medium Screen, and Small Screen models are $11, $9, and $7, respectively.
|
A |
B |
C |
|
|
LARGE SCREEN |
80 |
90 |
100 |
|
MED SCREEN |
50 |
40 |
40 |
|
SMALL SCREEN |
40 |
30 |
20 |
- The total cost associated with combination B is _______.
- This firm will produce combination ________.
- If the market price of a Large Screen increases to $12, ceteris paribus, then this firm will produce combination _______.
Solutions
Expert Solution
The
total cost of production of combination B is $ 1500
As it is given that the cost of production per production run is $1500 irrespective of combinations.
The firm will choose combination A as it gives the highest revenue out of three combinations as clear from calculations.
When the price of large screen increases to $12 keeping all other as same the firm will now choose Combination C because now it is giving greatest profit
Rahul Sunny answered 1 year agoRelated Solutions
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