Question

Kali is a dot-com entrepreneur who has established a Web site at which people can design and buy aring. Price (dollars per ring) 100 Quantity (rings per month) Kali pays $100 a month for a Web server and Internet connection. The rings that customers design are made to order by another firm, and Kali pays this firm $60 a ring. Kali has no other costs. 80 20 40 60 60 The table shows the demand schedule for Kali's rings. 100 Kali's profit-maximizing output is rings a month. Kali's profit-maximizing price is $| a ring. Kali's economic profit it is nonth.

Answer 1

Answer

20 units

$80

$300

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The firm produces at MR=MC or the nearest lower MC
MC=60=per ring varible cost is constant
TR=P*Q
TR(0)=100*0=0
TR(20)=20*80=$1600 and so on

MR(n)=(TR(n)-TR(p))/(n-p)
MR(n)= MR of n th unit of output
TR(n)=TR of n units of output
TR(p)=TR of p units of output
it is true for n>p

MR(20)=(1600-0)/(20-0)=80 and so on

P	Q	TR	MR
100	0	0
80	20	1600	80
60	40	2400	40
40	60	2400	0
20	80	1600	-40
0	100	0	-80

it produces

MR=80 and MC=60 at Q=20 units

P=80

Profit=TR-TC

TR=P*Q=80*20=1600

TC=fixed cost +varible cost * Q

fixed cost =cost of internet and hosting =100

variable cost =60*20=1200

TC=100+1200=1300

profit=1600-1300

=$300