Answer to Question #68101 in Microeconomics for aretin bella

Question

5.The Enviro-Guard Co. manufactures a line of heat pumps that typically are sold in the sunbelt states. Currently the company’s cost and demand relations for the heat pump line are:


TC = 15000000 + 125Q + .025Q2 (Cost)

P = 1000 - .04Q (Demand)

Where TC = total cost (RM), q = units/year, and P = price (RM).


a.Calculate the output level that minimizes average total cost.

b.Calculate price, average total cost, marginal cost, and total profit at output level calculated in part a.

c.Calculate the profit-maximizing output level.

d.Calculate the price, average total cost, marginal cost, and total profit at output level found in part c.

e.Is the price elasticity of demand greater (more elastic) at the price that minimizes ATC or at the price that maximizes profit?

Answer 1

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