Not all the homework will be assigned. Usually it is assigned after the class wh
ID: 1139990 • Letter: N
Question
Not all the homework will be assigned. Usually it is assigned after the class when we talk about that chapter Chapter 1: Econ HW B (Homework A is on the back of the syllabus) I am selling widgets. They cost $2 to make. If iI price the widgets at $20 each, I can only sell one. If I price them at S1 each, I can sell 20. Assume that demand is a straight line between those points. 1. 2, 3. 4. How many do I sell at $5 each? what is the total cost to make them (cost each times # sold)? What is the total revenue I make from selling them (price I sell each times the number sold)? What is my profit (revenue-cost)?Explanation / Answer
Question 1
It is provided that demand is straight line between the two given points.
This means for each increase or decrease in price by $1, quantity demanded increases or decreases by a constant amount.
When price of widget is $20, quantity demanded is 1 widget.
When price of widget is $1, quantity demanded is 20 widgets.
So, each increase of $1 in price, reduces quantity demanded by 1 widget.
This implies that at $5 per widget, 16 widgets would be demanded and sold.
Thus,
16 widgets would be sold at $5 each.
Question 2
Cost of producing 1 widget = $2
Number of widgets produced = 16 widgets
Calculate the total cost -
Total Cost = Cost of producing 1 widget * Number of widgets produced = $2 * 16 = $32
Thus,
The total cost to make them is $32.
Question 3
Price of widget = $5
Total widget sold = 16
Calculate the total revenue -
Total revenue = Price of widget * Total widget sold = $5 * 16 = $80
Thus,
The total revenue made from selling the widgets is $80.
Question 4
Calculate the profit -
Profit = Total revenue - Total cost
Profit = $80 - $32
Profit = $48
Thus,
The profit made is $48.
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