SOME PROBLEMS

PROFIT MAXIMIZATION
REVENUE MAXIMIZATION
DEMAND AND SUPPLY ANALYSIS
ELASTICITY, CONSUMER SURPLUS
1. A company has the demand function as: P = 12 – 0.4Q.
The cost function is: TC = 0.6Q2 + 4Q + 5. (USD)
In which: P is the price per unit (USD/unit),
Q is the quantity of production (unit)
Requirements:
• Write these functions: FC, VC, ATC, AFC, AVC, MC, TR, MR.
• Determine the output level in order to get the highest Revenue of
company? What is the company’s Total Revenue?
• Determine the output level in order to maximize the company’s
Profit? What is the price and profit in this situation?
• Determine the output level if company want to get as much as
revenue as possible with condition of profit equal to 10 (USD)
Lieberman & Hall;
Introduction to Economics, 2
2005
1. A company has the demand function as: P = 80 – Q.
The cost function is: TC = Q2 + 4Q + 50. (USD)
In which: P is the price per unit (USD/unit),
Q is the quantity of production (unit)
Requirements:
• Write these functions: FC, VC, ATC, AFC, AVC, MC, TR, MR.
• Determine the output level in order to get the highest Revenue of
company? What is the company’s Total Revenue?
• Determine the output level in order to maximize the company’s
Profit? What is the price and profit in this situation?

Lieberman & Hall;

Introduction to Economics, 3
2005
3. A company has the demand function as: P = 1100 – Q
• The average cost is: ATC = 300 + 97500/Q
In which: P is the price per unit (USD/unit),
Q is the quantity of production (unit)
Requirements:
• Determine the output level in order to get the highest Revenue
of company? What is the company’s Total Revenue?
• Determine the output level in order to maximize the company’s
Profit? What is the price and profit in this situation?
• The company will sell at which price level in order to reach break
even point (no loss, no profit)
Lieberman & Hall;
Introduction to Economics, 4
2005
 Demand and Supply
4. Market of Dragon fruit has the demand function is:
QD = 180 – 10P, and supply function is Qs = 20P - 110
• a, Deterimine price and quantity at equilibrium point?
• b, What happens if Government give price ceilling at
12000/kg?
• c, What happens if Government give price floor at
14000/kg
• d, Represent all the results in 1 graph.
5. Given the demand and supply quantity of product X, 2018 at different
price as follow:
In which: P is the price and in USD/kg,
Q is the quantity of demand or supply in (1000kg).

Requirements: Use the above data to answer these questions:

Determine the demand and supply functions and show in a graph.
Find the price and quantity at market equilibrium point.
At the equilibrium point, find the demand elasticity and supply elasticity according
to price.
Determine the consumer surplus at equilibrium point
Demand Supply
P QD P QS
1 50 1 32
2 45 2 36
3 40 3 40
4 35 4 44
5 30 5 48
6 25 6 52