Economics MBA profit maximisation toffee

  1. [SOLVED] Economics MBA profit maximisation toffee

    Hi Guys
    I have a total blonde moment here :
    The question goes :

    I need to determine the profit maximising equilibrium output,price and total profit under 2 conditions
    a) firm is monopolist b ) perfect competition ( I have the theory on these )

    where a firm Produces output at cost of : C = 50 + 20 X
    and sells at price P= 220 - 4 X

    I started with X ( being any ) and made my colomns , now I am daft - I cannot get the Total cost , Average cost ext to get to the correct profits ????
    Should I have used ( X ) as only 1 extra unit , 2 extra units ext or can I still do 10 units , 20 units?
    I confused myself here totally.I would appreciate another few brains.
    Thank You Thank You
    Jackie
     
  2. jcsd
  3. CRGreathouse

    CRGreathouse 3,682
    Science Advisor
    Homework Helper

    Profit is maximized when the cost to produce an extra unit is equal to the price it is sold at.
     
  4. EnumaElish

    EnumaElish 2,481
    Science Advisor
    Homework Helper

    You can go with 10, 20, but the answer won't be as accurate.

    In Excel, just tabulate P and C for X = 1, ..., 55. (Do you see why you don't need to go over 55?)

    For Monopoly, calculate profit as revenue - cost. I am assuming you can calculate a revenue from price (P) and quantity (X) at each level of X. Profit should be maximized when the change in revenue is equal to the change in cost for an extra unit. (That's CRGreathouse's intuition applied to a monopoly.)

    For perfect competition, find the X at which price equals the additional cost of producing X units instead of X-1 units. Can you see what that additional cost is when you look at the formula for C?

    For monopoly, the "exact" solution (in fractional units) necessitates use of calculus (derivatives).
     
    Last edited: Aug 28, 2007
  5. Thank you very much.It helped me tremendously. I could see where I went wrong.
    I appreciate helpful people like you !
    God bless.
     
  6. Hi

    Can you please elaborate on the calculation for perfect competition. I still do not get the additional cost. Thank you so much.
     
  7. EnumaElish

    EnumaElish 2,481
    Science Advisor
    Homework Helper

    Just do the calculation. What is C when X = x? What is C when X = x+1?
     
  8. Thank you again,I managed.
    I would need help later on with Quantitative methods.
    Can I pose questions as I study the equations ?
    My email is jackie@mso.co.za
    Thanks for sharing your knowledge to help others !
    Jackie
     
  9. EnumaElish

    EnumaElish 2,481
    Science Advisor
    Homework Helper

    You may pose all "homework type" questions in forums "precalc math" or "calc & beyond" (as appropriate).

    Any open-ended, discussion-type questions should be posed under the appropriate science forum.
     
  10. what isthe price andtoal profit of a monopolistwhen p=220-4x and cost =50+22x?
     
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