Example Question - profit
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Profit Calculation from Sale of Articles
<p>The image shows a handwritten question about profit calculation.</p> <p>Let's denote:</p> <p>\( CP \) = Cost Price</p> <p>\( SP \) = Selling Price</p> <p>Given that the seller sells one article for \( \$6000 \) and a loss \( SP = CP - \frac{CP}{7} \).</p> <p>We then express \( SP \) in terms of \( CP \):</p> <p>\( SP = CP - \frac{CP}{7} \)</p> <p>\( SP = \frac{6CP}{7} \)</p> <p>Now, if the seller sells another article for \( \$7000 \) with a profit of \( SP = CP + \frac{CP}{7} \),</p> <p>We express this \( SP \) in terms of \( CP \):</p> <p>\( SP = CP + \frac{CP}{7} \)</p> <p>\( SP = \frac{8CP}{7} \)</p> <p>Now we have two equations:</p> <p>1) \( \frac{6CP}{7} = 6000 \)</p> <p>2) \( \frac{8CP}{7} = 7000 \)</p> <p>We can now solve for \( CP \) from either equation, but equation 1) is simpler:</p> <p>\( CP = \frac{6000 \times 7}{6} \)</p> <p>\( CP = 7000 \times \frac{7}{6} \)</p> <p>\( CP = \$7000 \)</p> <p>Now, find the total profit when he sells both articles:</p> <p>The profit from selling the second item is \( \$7000 \) with a profit of \( \frac{CP}{7} \):</p> <p>\( Profit = \frac{CP}{7} \)</p> <p>\( Profit = \frac{7000}{7} \)</p> <p>\( Profit = \$1000 \)</p> <p>Since he sells the first item at a loss of \( \frac{CP}{7} \), which is \( \$1000 \), and the second one at a profit of \( \$1000 \), the total profit is:</p> <p>\( Total\,Profit = Profit\,from\,second\,item - Loss\,from\,first\,item \)</p> <p>\( Total\,Profit = \$1000 - \$1000 \)</p> <p>\( Total\,Profit = \$0 \)</p> <p>Therefore, the seller neither makes a profit nor incurs a loss overall.</p>
Cost Schedule Analysis for a Firm
(a) To calculate the Total Variable Cost (TVC) and Total Cost (TC): <p></p> <p>TVC = Output \times Marginal Cost</p> <p>TC = Total Fixed Cost + TVC</p> <p>At output 1: TVC = 1 \times 10 = 10, TC = 20 + 10 = 30</p> <p>At output 2: TVC = 2 \times 20 = 40, TC = 20 + 40 = 60</p> <p>At output 3: TVC = 3 \times 30 = 90, TC = 20 + 90 = 110</p> <p>At output 4: TVC = 4 \times 40 = 160, TC = 20 + 160 = 180</p> <p></p> (b) To calculate the Total Revenue (TR) at each level of output if price is $30: <p></p> <p>TR = Price \times Output</p> <p>At output 1: TR = 30 \times 1 = 30</p> <p>At output 2: TR = 30 \times 2 = 60</p> <p>At output 3: TR = 30 \times 3 = 90</p> <p>At output 4: TR = 30 \times 4 = 120</p> <p></p> (c) To calculate the profit/loss at each level of output: <p></p> <p>Profit/Loss = TR - TC</p> <p>At output 1: Profit/Loss = 30 - 30 = 0</p> <p>At output 2: Profit/Loss = 60 - 60 = 0</p> <p>At output 3: Profit/Loss = 90 - 110 = -20 (loss)</p> <p>At output 4: Profit/Loss = 120 - 180 = -60 (loss)</p> <p></p> (d) The firm will be in equilibrium at the output level where TR = TC: <p></p> <p>At output 1 and 2 the TR equals TC, so the equilibrium price would be at output levels 1 and 2 if the price should remain at $30.</p> <p></p> (e) With the provided information, it's not possible to determine the time period of the firm's operation, as it requires additional business cycle data or context.
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