A firm produces for two markets, (#1 & #2). The demand curves and total cost cur

Question

A firm produces for two markets, (#1 & #2). The demand curves and total cost curve are shown below. The schedules below are derived from these demand and cost curves. Consider the body of information and then answer the questions that follow. P:-$60 TC= 128 +69Q-14Q + Q P2 132-8Q2 TC- 128+ 690 14Q+Q Pi TR ARs MRi TC TFC TVC ATC AFC AVC MC P2 TR2 AR2 MR2 Ili 112 0 60 0 60 60 128 1 60 60 60 60 184 2 60 120 60 60 218 3 60 180 60 60 236 108 78.7 4 60 240 60 60 244 116 61.0 5 60 300 60 60 248 120 49.6 6 60 360 60 60 254 126 42.3 7 60 420 60 60 268 140 38.3 8 60 480 60 60 296 168 37.0 9 60 540 60 60 344 216 38.2 10 60 600 60 60 418 290 41.8 69 132 0 0 56 184.0 90 109.0 56 44 124 124 116 45 25 116 232 36 12 108 324 29 5 100 400 68 24 4 92 460 21 9 84 504 20 20 76 532 21 37 68 544 24 60 60 540 -12 29 89 52 52028 84 52 36 20 (1)Complete columns 7 (TFC), 10 (AFC), 15 (AR2), 17(profit in market #1), 18 (profit in market #2). (Round your numbers to one decimal point), Briefly comment on your observations about ATC, AFC & both AR1 relative to MRi and ARz relative to MR2 (2)Determine the profit maximizing output in each of the two markets (3)What price would the firm charge in market 2 if the firm produces the profit maximizing output? (4)Find the total profit earned in each of the two markets. (5)At what price will the firm in market 1 and the firm in market 2 shut down? (6)Find the price elasticity of demand at equilibrium in each of the markets.

Explanation / Answer

Q P1 TR1 AR1 MR1 TC TFC TVC ATC AFC AVC MC P2 TR2 AR2 MR2 II1 II2 0 60 0 128 128 0 132 0 -128 -128 1 60 60 60 60 184 128 56 184 128 56 56 124 124 124 124 -124 -60 2 60 120 60 60 218 128 90 109 64 45 34 116 232 116 108 -98 14 3 60 180 60 60 236 128 108 78.66667 42.66667 36 18 108 324 108 92 -56 88 4 60 240 60 60 244 128 116 61 32 29 8 100 400 100 76 -4 156 5 60 300 60 60 248 128 120 49.6 25.6 24 4 92 460 92 60 52 212 6 60 360 60 60 254 128 126 42.33333 21.33333 21 6 84 504 84 44 106 250 7 60 420 60 60 268 128 140 38.28571 18.28571 20 14 76 532 76 28 152 264 8 60 480 60 60 296 128 168 37 16 21 28 68 544 68 12 184 248 9 60 540 60 60 344 128 216 38.22222 14.22222 24 48 60 540 60 -4 196 196 10 60 600 60 60 418 128 290 41.8 12.8 29 74 52 520 52 -20 182 102 2) Profit maximizing occurs where MR= MC. In market 1 profit maximizing output is 9 and in market 2 is 7. 3) Price in market 2 is 14 4) Profit in market 1 is 184 and in market 2 is 264.

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