ECO401 Assignment 2...

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# ECO401 Assignment 2 Solution Spring 2021 || eco401 Assignment No 2 || 100% Correct Solution

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Requirment.1

Profit is maximized at the point where:

MC=MR

MC function can be find by taking derivative of total cost (TR) function

MC=

MC=(50+10)

MC=10

MR function can be found bt taking derivative of total cost (TR) function

MR=

MR=(175Q+2.5Q²)

MR=175+Q

As profit is maximized at the point where MR=MC, so by equating values of MC and MR function,

We get,

MC=MR

10=175-5Q

5Q=175-10

5Q=165

Q=

Q=33

Requirment.2

The equation for total profit is

T

Tπ=(175Q-2.5Q²) - (50+10Q)

Tπ=175Q – 2.5Q² - 50-10Q

Tπ=165Q – 2.5Q²-50

Putting Q=33, we get

Tπ=165(33) – 2.5(33)² - 50

Tπ=5445 – 2.5(1089)-50

Tπ=5445 – 2722.5 – 50

So profit is maximized where output is 33 and the maximum profit is 2672.5

Requirment.3

We can also calculate AR from this information

TR=175Q-2.5Q²

AR=

AR=

AR=  -

AR= 175 – 2.5Q

AR= 175-2.5(33)

AR= 175-82.5

AR= 92.5

Slope of average revenue (AR) function.

Slope of AR=

Slope of AR= (175-2.5Q)

Slope of AR=-2.5

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