Problem 1: Tetrangle Manufacturing has fixed costs of $2,160 per day. The firm manufactures bicycle component upgrade kits. The kits have a short-run average variable cost of $48 and are sold for $66 each.
Q1. What is the break even level of daily output for the firm?
Q2. What is the degree of operating leverage when daily output is Q = 170?
Problem 2. The market supply and demand functions for a product traded on a perfectly competitive market are given below:
QD = 25 - P
QS = -5 + 4P
Calculate the equilibrium price and quantity.