Soundex Produces Two Models of Clock Radios

question 162

Essay

Soundex produces two models of clock radios. Model A requires 15 min of work on assembly line I and 10 min of work on assembly line II. Model B requires 9 min of work on assembly line I and 12 min of work on assembly line II. At most 25 hr of assembly time on line I and 21 hr of assembly time on line II are available each day. Soundex anticipates a profit of $12 on model A and $10 on model B. Because of previous overproduction, management decides to limit the production of model A clock radios to no more than 80/day. The range of values that the contribution to the profit of a model A clock radio can assume without changing the optimal solution is . If the contribution to the profit of a model A clock radio is changed to $9.50/radio, will the original optimal solution still hold? Answer yes or no. __________
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What will be the optimal profit? Round to the nearest dollar. $ __________

Analyze the demand curve faced by perfectly competitive firms.

Describe the impact of market entry and exit on market equilibrium in perfect competition.

Understand the relationship between price and marginal revenue for perfect competitors.

Determine the profit or loss maximization level of output for a firm.

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Definitions:

Deadweight Loss

An economic inefficiency caused by a disruption in market equilibrium, leading to a loss of societal welfare.

Consumer Surplus

The disparity between the ideal total expenditure consumers are willing to make on a good or service and the real expenditure.

Producer Surplus

The distinction in financial terms between what producers expect to receive for a product or service and the actual revenue attained.

Producer Surplus

The difference between the amount producers are willing to sell a good for and the actual market price they receive, reflecting the benefit to producers from selling at a higher price.