Suppose a large corporation produces airplanes in a perfectly competitive indust

Question

Suppose a large corporation produces airplanes in a perfectly competitive industry. The data in the following table give information about the cost of producing a particular type of airplane (in thousands), where quantity is q: total cost is C: and marginal cost is MC. .Airplanes sell for $80 thousand. Suppose this firm has the capacity to produce up to 11 airplanes of this particular type. If the company manager's goal is to maximize revenue, how many airplanes will the firm produce? airplanes. (Enter your response using an integer.) What will be the firm's profit? $ thousand. (Enter your response rounded to two decimal places.) Suppose instead that the manager's goal is to maximize profit. If so: then how many airplanes will the firm produce? airplanes. (Enter your response using an integer.) What will be the firm's profit? thousand. (Enter your response rounded to hvo decimal places.)

Explanation / Answer

(1)

Revenue = P x Q

P being fixed (= 80), revenue is maximized when Q is maximum, that is, Q = 11

(2)

Profit = Revenue - cost

= P x Q = C

= 11 x 80 - 924 = - 44 (LOSS)

(3)

From the table given, maximum profit = 31, when Q = 8

(4)

When Q = 8, profit = (8 x 80) - 609 = 31

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