Assignment:
Profits at SPAM-Whiz Corp. Name______________________
The SPAM-Whiz Corporation has the following revenues and costs.
Quantity
|
TC
|
ATC
|
MC
|
MR @ P=10
|
AR @ P=10
|
TR @ P=10
|
Profit @ P=10
|
MR @ P=15
|
AR @ P=15
|
TR @ P=15
|
Profit @ P=15
|
|
0
|
10
|
|
|
|
|
|
|
|
|
|
|
|
1
|
20
|
|
|
|
|
|
|
|
|
|
|
|
2
|
28
|
|
|
|
|
|
|
|
|
|
|
|
3
|
38
|
|
|
|
|
|
|
|
|
|
|
|
4
|
50
|
|
|
|
|
|
|
|
|
|
|
|
5
|
65
|
|
|
|
|
|
|
|
|
|
|
|
6
|
85
|
|
|
|
|
|
|
|
|
|
|
1.Define TR, MR, AR and Profits:
2.How much are the corporation's fixed costs?
3.Calculate MC and ATC and fill in the columns above. Plot MC and ATC on the graph below.
4.Assume the corporation is a price-taker and can sell all it wants at a price of $10. Calculate TR, MR, and profit and fill in the appropriate columns above. Then plot AR and MR on the graph below. What quantity of output will maximize total profits at a price of $10?
5.What is the profit maximizing rule (using MR and MC)?
6.Based on the profit-maximizing rule what is the profit-maximizing level of output? Does this answer match the answer to question #3?
7.Now assume the corporation is a price-taker and can sell all it wants at a price of $15. Calculate TR, MR, and profit and fill in the appropriate columns above. Plot MR and AR at this new price on the graph below. What quantity of output will maximize total profits at a price of $15?
8.In the graph below, plot the points for the profit-maximizing output at prices of $10 and $15, and connect these points with a line (curve). This is a supply curve for a profit maximizing firm.
9.At a price of $15, is SPAM-Whiz earning a normal profit, an economic (excess) profit, or an economic loss? How can you tell?
10.Will there be entry or exit of firms in this industry at a price of $15?