Chat with us, powered by LiveChat 2 quesiton aboutManagerial Economic | Abc Paper

2. (20 points). Firm K is a leading maker of light-weight, water-proof
outerwear. During the winter months, demand for its main line of
water-proof coats is given by: P = 800 − 0.2Q, where P denotes price
in dollars and Q is quantity of units sold per month. The firm produces
coats in a single plant (which it leases by the year). The total monthly
cost of producing these coats is estimated to be: C = 150, 000 + 400Q.
Leasing the plant accounts for almost all of the $150,000 fixed cost.
What is the firm’s marginal cost? Find the firm’s profit-maximizing
output and price. If the firm’s other outerwear products generate
$50,000 in contribution, what is the firm’s total monthly profit? (a) From time to time corporate customers place special orders for
customized versions of Firm K’s raincoat. Corporate orders generate an average contribution of $100 per coat. Firm K tends to
receive these orders at short notice usually during the winter
when its factory is operating with little unused capacity. Firm K has just received an unexpected corporate order for up to 300
coats but has unused capacity to produce only 200. One manager
recommends delivering 200 coats (The client would still be satisfied with 200 coats). A second manager argues for cutting back
production of standard coats (by 100) to fill the full corporate order. Who is right? Explain carefully. In general, can you suggest
any other ways to free up capacity in the winter?4. (10 points) A small nation permits free trade in good X. At the good’s
free-trade price of $8, domestic firms supply 6 million units and imports account for 4 million units. Recently, the small country has
erected trade barriers with the result that imports have fallen to zero,
price has risen to $10, and domestic supply has increased to 8 million
units. Calculate the change in consumer surplus and producer surplus
resulting from the trade barrier. What is the deadweight loss?

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