Determine the firm profit maximizing output and profit

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1. You work for the residential mortgage lending division of a leading financial institution. This institution also separately operates a division specializing in commercial space rental loans. Recently the residential mortgage lending division has been largely unprofitable and the new CEO has provided division heads with the following ultimatum: “…hive off money-losing businesses and deliver profits within a year – or else resign.” You notice that due to the nature of products offered by the two lending divisions there is a cost saving strategy that could be adopted by your institution. Based on your observation make a detailed argument to the CEO explaining why your division shouldn’t be shut down and what strategy the company should adopt to turn losses into profits.

2. A company decides to spend $2 million to promote its new line of soft drinks. Given all other things remain the same, how will this impact the level of break-even quantity of the firm? Justify your answer using the equation for breakeven quantity of the firm.

3. The Green Company produces chemicals in a perfectly competitive market. The current market price is $40. The firm’s total cost is given by so that marginal cost is

A. Determine the firm’s profit maximizing output and profit. Show your calculations.

Reference no: EM131094912

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