Purchase Solution

Production Economics of Widgets

Not what you're looking for?

Ask Custom Question

A widget manufacturer sold 10,000 widgets for $2.50 each. Total fixed costs are $5,000 and variable costs per unit are $.80.

(a) Given this information, what is the total profit for this production run?
(b) Marketing research indicated that the price elasticity demand coefficient for the widgets is 2.5.
(c) The factory wants to increase revenues and profits.
(d) Find the quantity and price point which will maximize profits.

Use table provided to calculate new price points. Add lines as needed.

To get started, what does a coefficient of 2.5 indicate? Is the product price elastic or inelastic?

QTY Unit price Revenues Total fixed costs Total variable cost Total cost Total profit

Current 10,000 $2.50 $5,000
New (1)
New (2)
New (3)
New (4)

Purchase this Solution
Solution Summary

Economics for a widget manufacturer is analyzed. The total profits for a production run is calculated. The expert finds the quantity and price point for which profits will be maximized.

Solution Preview

a) Total profit = total revenue - total cost = $2.5 X 10000 - $5000 - $0.8 X 10000 = $12,000

What does elasticity = 2.5 mean? The price elasticity is measures the how much quantity demanded will change if price changes. A good is said to be inelastic if elasticity is less than 1, unit elastic if elasticity = 1 and elastic if elasticity > 1. To get an understanding ...

Purchase this Solution
Free BrainMass Quizzes
Economic Issues and Concepts

This quiz provides a review of the basic microeconomic concepts. Students can test their understanding of major economic issues.

Economics, Basic Concepts, Demand-Supply-Equilibrium

The quiz tests the basic concepts of demand, supply, and equilibrium in a free market.

Pricing Strategies

Discussion about various pricing techniques of profit-seeking firms.

Elementary Microeconomics

This quiz reviews the basic concept of supply and demand analysis.

Basics of Economics

Quiz will help you to review some basics of microeconomics and macroeconomics which are often not understood.

View More Free Quizzes
Related BrainMass Solutions

  • Unconstrained Optimization: level of production that maximizes profits

    2749 Unconstrained Optimization: level of production that maximizes profits Unconstrained Optimization 1. Assume that you can sell widgets at $25 per widgets, for as many widgets as you can make.

  • The forecasted sales

    Economics and management ________________________________________ The demand equation for the Widget Company has been estimated to be: Qd = 30,100 +10I -50P +20Pc, where Q = monthly number of widgets sold, I = average monthly income, P = price of

  • Fixed and Variable Costs for specialty widgets

    You production run of widgets averages 10,000 widgets in any given 30-day month. Your selling price for the widget is $79.95 and you sell direct via the Internet. What is your Unit FC per widget? Your Unit VC per widget?

  • Finding economical lot size, carrying and annual costs

    What is the economical lot size for production of widgets?

  • Standard deviation of production process.

    207968 Standard deviation of production process. Widgets production process yields widgets with an average life of 180 hours and σ = 10 hours. The tolerance upper and lower specification limits are 240 hours and 160 hours, respectively.

  • Analyzing the Given Cost Data

    2) Draw a graph of total production costs vs. number of widgets. 3) Draw a graph of marginal cost of production vs. number of widgets. 4) Does the firm exhibit increasing or decreasing returns to scale?

  • Break even point with sales mix

    Each widget costs $11 to product, and has a market price of $20.  5 Slingers are sold for every 7 Widgets.   The production facility of the firm can produce any number of widgets and slingers required.

  • Important Information About Supply and Demand Changes

    .....your costs of production decrease = your profit per Widgets sold has also increased.

  • deadweight loss

    (There are substantial economies of scale in the production of widgets, so Wanda's Widgets can produce widgets at a lower cost than a competitive firm could, Wanda's Widgets changes its pricing methods and becomes a perfectly discriminating monopolist

View More Related Solutions