Discussion:
1. Sub-Temp, Inc., offers modular freezers to restaurants and other institutional buyers. Each freezer is a self-contained unit and can be used individually or in tandem with additional modules of different shapes and sizes. During the current period, Sub-Temp estimates the following total cost and demand relations for its line of modular freezers (11 pts.):
TC = $2,000,000 + $150q + $0.02q2
P = $900 - $0.03q
where TC is total cost, q is output and P is average price.
A. Calculate the output level at which average total cost will be minimized.
B. Calculate the price, average total cost, marginal cost, and total profit at the output level found in Part A.
C. Calculate the profit-maximizing output level.
D. Calculate price, average total cost, marginal cost, and total profit at the output level in Part C.
E. Compare your answers to Parts A and C. Under what conditions will these answers be identical?