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SEMESTER SPRING 2014
MANAGERIAL ECONOMICS (ECO404)
DUE DATE: 11th July, 2014
ABC Technology Corp. Ltd is a leading supplier of standard 128 MB-RAM
computer chip. This Corporation was established in 1980 and has manufactured
computer chips by employing excellent team with broad experience. There are a
number of competitors of ABC’s manufactured chips as they are producing the
same output in terms of its shape, size and speed. ABC Technology Corp. Ltd
has a large market share and earns huge profit due to cost minimization. But, top
management has analyzed that this robust market competition can decrease the
equilibrated market price level. The total and marginal cost functions of ABC
Technology Corp. Ltd are:
TC=50,000 +35Q +0.0002Q2
MC=¶TC/¶Q=35 + 0.0004Q
Where Q is the number of computer chips produced.
A- By taking into account the forecasting of top management and above
total and marginal cost functions of ABC Limited Company, calculate
Company’s optimal output and profits if chip prices are stable at $45
B- If chip price fall to $40 due to high competition then calculate ABC
Limited Company’s optimal output and profits/Loss.
(Marking scheme: 10+10)
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