The start-up you work for is in its third year and has been steadily expanding its...
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The start-up you work for is in its third year and has been steadily expanding its sales. Recently, the firm hired a CFO to support its growth, and revenue and cost data are now being systematically collected and analyzed. There are a few concerns. Engineers say that the additional cost of producing a unit of the good is not constant, but has been rising as the production volume grew. Higher sales have been achieved through price reductions, and management wonders whether the higher costs are being recovered through the price the company charges. You were asked by the CFO to investigate this issue and calculate the revenue and cost per unit at different production levels. You are given estimated revenue and cost functions, which are R = 80Q and C = 1,100 + 16Q+Q2 (where R is revenue, C is cost, and Q is number of units made and sold). Using your economics background, you determine that you need to compute the marginal revenue and marginal cost functions. You report that: Marginal revenue is MR = 80; marginal cost is MC = 16+ 2Q; each additional unit brings in 64-2Q in net revenue. Marginal revenue is MR = 40Q; marginal cost is MC = 16Q; each additional unit brings in 24Q in net revenue. Marginal revenue is MR = 80Q2; marginal cost is MC = 8Q²; each additional unit brings in 72Q2 in net revenue. Marginal revenue is MR = 40 - 2Q2; marginal cost is MC = 2Q; each additional unit brings in 40 + 2Q-2Q2 in net revenue. The start-up you work for is in its third year and has been steadily expanding its sales. Recently, the firm hired a CFO to support its growth, and revenue and cost data are now being systematically collected and analyzed. There are a few concerns. Engineers say that the additional cost of producing a unit of the good is not constant, but has been rising as the production volume grew. Higher sales have been achieved through price reductions, and management wonders whether the higher costs are being recovered through the price the company charges. You were asked by the CFO to investigate this issue and calculate the revenue and cost per unit at different production levels. You are given estimated revenue and cost functions, which are R = 80Q and C = 1,100 + 16Q+Q2 (where R is revenue, C is cost, and Q is number of units made and sold). Using your economics background, you determine that you need to compute the marginal revenue and marginal cost functions. You report that: Marginal revenue is MR = 80; marginal cost is MC = 16+ 2Q; each additional unit brings in 64-2Q in net revenue. Marginal revenue is MR = 40Q; marginal cost is MC = 16Q; each additional unit brings in 24Q in net revenue. Marginal revenue is MR = 80Q2; marginal cost is MC = 8Q²; each additional unit brings in 72Q2 in net revenue. Marginal revenue is MR = 40 - 2Q2; marginal cost is MC = 2Q; each additional unit brings in 40 + 2Q-2Q2 in net revenue.
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Related Book For
Fundamentals of Heat and Mass Transfer
ISBN: 978-0471457282
6th Edition
Authors: Incropera, Dewitt, Bergman, Lavine
Posted Date:
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