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# ECO404 Assignment#02 Solution & Discussion Spring 2011

Question: 01
Consider the following information of the firm:
Total fixed cost = Rs. 350
Price level = Rs. 20
Average variable cost = Rs. 10
Target profit level = Rs. 250
From this information, calculate the break even level of output and target
level of output.
(Marks: 2.5+2.5)
Question: 02
You have given the following linear programming problem:
Maximize Profit (π) = Rs. 20X + Rs. 8Y
Subject to the following constraints:
3X + 1Y + SA = 40
2X + 2Y + SB = 25
4Y + SC = 30
The corner points are given as:
Corner points X Y
A 0 0
B 7 0
C 5 3
D 2 7
E 0 7
From all this information, find the profit (Rs.) level at each corner point.
(Marks: 5)
Question: 03
Given the total revenue and total cost functions:
TR = 80Q – 0.00025Q2
TC = 260,450 + 5Q +0.00035Q2
Find the profit maximizing level of output under monopoly.

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