Computation of profit maximizing level of output


Computation of profit maximizing level of output, the price, the maximum profits also the price elasticity at the optimal output.

In 1991, Brazil also Columbia united to form a coffee cartel also reduce coffee output. Suppose total costs for the cartel are:

TC = 12 + 5Q + Q2

Here Q is millions of pounds of coffee. The marketplace demand curve for coffee is:

P = 17 - Q

Here P is millions of dollars per million pounds. Suppose before the cartel was formed, output was 11 million pounds. In the Wall Street Journal a Columbian delegate to the cartel said which he believed which if the cartel reduced coffee output by 10%, the price would rise by 20%.

Compute your price elasticity of demand based on the Columbian Delegates belief.

Given this price elasticity-Illustrate what is the anticipated change in price as the result of an 10% decrease in output (remember monopolists also oligopolists control output not price; price is the result of output also demand)

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Business Economics: Computation of profit maximizing level of output
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