JNU- 2010 Doubt

[jack]

These six questions 11-16 are based on the following table which gives the variable cost of producing the different levels of output of a commodity that a competitive firm might produce:
OUTPUT ,VARIABLE COST OF PRODUCTION
0,0
1,25
2,42
3,54
4,64
5,75
6,93
7,112
8,140
9,180
10,230
The sunk cost of production in the short run is 15.
QUES14
If the price of commodity is 14, then the profit maximizing level of output is:
a.4
b.5
c.0
d. None of the above
ANS - c
QUES15
If the price of commodity is 17, then the profit maximizing level of output is:
a.1
b.2
c.3
d.5
ANS -d

can anyone help me how to do these quetions????

[Anjali]

Ques 14 :  0
Ques 15 :  5

[Anjali]

Just find the combination where difference is maximum between revenue and cost. And do not take sunk cost into account.

[Arushi :))]

First task is to find out marginal cost corresponding to each level of output,
OUTPUT ,VARIABLE COST OF PRODUCTION , MARGINAL COST
0,0 , 0
1,25 , 25
2,42 , 17
3,54 , 12
4,64 , 10
5,75 , 11
6,93 , 18
7,112 , 19
8,140 , 28
9,180 , 40
10,230, 50
NOTE:
A perfectly competitive firm will never produce on that portion where MC is decreasing,
In case of 14th question , If P= 14,
MC is decreasing till 4th unit,
It increases from 4th to 5th unit.
so, 4 and 5 can't be the options because
at 4 MC is decreasing and at 5
TR=60, VC= 75
In the increasing portion of MC curve,
if we see 6 and 7 units,
then at 6; TR=84 , VC=93
and at 7,  TR=98 , VC = 112
Thus, firm can't produce here. And beyond 7 units, its not feasible for the firm to produce because P<MC.
Hence , the optimal level of production would be 0 units .
For 15th question:
If P= 17,
first guess would be 2 units , because at 2 units, MC = 17.
But again that's on decreasing portion of MC curve.
in fact , 1,2 & 3 all are on decreasing portion of MC curve.
only option left is  5 units then.
At 5
TR = 17*5=85
VC= 75
So it can cover the variable costs,
And it will choose to produce 5 units.
so option is d.

[jack]

thank you so much

[Ridhika]

folks please help with the following JNU 2010 questions:

32 - I get (a).. is that right?
40 - how to approach this?
42 - is the answer b?
76 - what is a linear accelerator?

[Anjali]

What are your answers for 11 and 12 Arushi ?

[Homer Simpson]

32(b)

40 (d)- its harmonic series, doesnt coverge to any finite value (some condition is there where it does but not in this case)

42(b)

70 (c) Linear accelerator is basically the fixed fraction at which the firm undertakes net investment in year t to fill up the gap between its desired capital level K* and K of (t-1) period.

[Anjali]

Tsuki what are your answers for 11-16 ?

[Homer Simpson]

11(b), 12(b), 13(c), 14(b), 15(d), 16(d)

[ishita1793]

@anjali
how do you do the 22nd one?

[jack]

@22
MR=P(1-1/Ed)
MR=60(1-1/4)
MC=45 (MR=MC)
so,
option c

[Bin]

Please answer this!

83,84,85

 87 also

[Bin]

72

[Bin]

71

[Bin]

[Bin]

[Bin]

[Bin]

[Homer Simpson]

83(a)
85(a)
72 either (b) or (c)
87(b) - not sure!
65(d)
67(c)