Lagrangian Multipliers
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Fixed capital and labor expenses are $1.2 million per year.
Variable expenses average $2,000 per van conversion.
Q=1,000 - 0.1P where Q is the number of van conversions (output) and P is price.
Calculate the profit maximizing output, price and profit levels.
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Solution Summary
Calculate the profit maximizing output, price and profit levels.
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Fixed cost = 1,200,000
Unit Variable cost = 2000
So the cost function is TC = FC + VC = 1200,000 + 2000 Q
Then marginal cost = AVC = 2000
Since Demand is Q ...
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