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Your company has estimated its total cost to be TC = 7000 + 0.05Q + 0.0015Q2; its marginal cost is thus MC = 0.05 + 0.003Q, where Q is the quantity of units produced and TC is in dollars. Since your market is relatively competitive, your company is able to sell its output for $13.55 each (which thus yields MR = 13.55 and TR = 13.55Q).

a.  Produce a chart in Excel showing TC and TR with Q on the horizontal axis. Have Q go from 0 to 10,000 units. Produce a second chart showing MC and MR with Q again on the horizontal axis.

b.  What is the optimal level of output for your company to produce/sell? What is the marginal revenue from the last unit sold?

c.  What are the total revenue, total cost, and profit (net benefit/net revenue/etc.) from selling the optimal number of units?

d.  An eager intern at your company suggests that, since the company earns $13.55 revenue for each unit sold, then the company could make still more profit by selling more than the level chosen in part b; why would company not want to produce and sell more output than the level chose in part b?


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