It Costs Extel $25 Per Chip to Make Its E86

question 26

Essay

It costs Extel $25 per chip to make its E86 chip used in notebook and other personal computers.Extel can sell all the chips it manufactures using a unit pricing model of ($60 - $0.01X) where X is the daily production of the chip.Fixed daily production costs are $700.A.Formulate an unconstrained nonlinear model that models Extel's
daily profit for its E86 chip.
B.What should be Extel's daily production of the chip, its price,
and the daily profit from producing the chip?
C.Suppose its capacity to make chips is limited to 2000 per day.
What should be Extel's daily production of the chip, its price, and the daily profit from producing the chip?
D.Suppose its capacity to make chips is limited to 1500 per day.
What should be Extel's daily production of the chip, its price, and the daily profit from producing the chip?
E.Write the Kuhn-Tucker conditions for the model for part D, and show that your solution satisfies these conditions.

Identify the reasons why monopolistic competitors and monopolists charge a price greater than the marginal cost of production.

Recognize the role of advertising in monopolistic competition to influence demand and address excess capacity.

Analyze the long-term economic profit outcomes for monopolistic competitors versus perfect competitors.

Describe the concept of excess capacity in monopolistic competition and its implications on production levels and profits.

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Definitions:

Income Loss

Refers to a decrease in earnings or revenue, often due to unexpected events, market changes, or operational failures.

Interest Rates

The cost of borrowing money, expressed as a percentage of the amount borrowed, or the return on investment for savings and loans.

Mortality Rates

A measure of the number of deaths in a particular population, scaled to the size of that population, per unit of time.

Income Growth

An increase in an individual's or economy's income or earnings over time.