Blog 3 Falco

Part 1

Fal-corp is a fictional company that makes electric powered mono-cycle.

Part 2

Total Fixed costs include:  cost of facilities ($300,000), equipment ($50,000), utilities ($300)

Variable cost for producing one unit is $10,200

Unit Price would be $25,000

C(q)= 10,200q+350,300

R(q)=25,000q

P(q)= (25,000q)-(10,200q+350,300)

25,000q=10,200q+350,300
14,800q=350,300
q=23.669 (this is the break even point)

Cost v Revenue 

The break even point on the graph is the point where cost and revenue equal, any point after this will represent profit in Fal-Corp, the marginal revenues aft this point will always be greater than the marginal costs. You can see this by the fact that the cost functions slope is increasing less than the revenue function

Profit Function 

The graph of the profit function shows that profits will be negative (losses) until around 24 units

Part 3

Fal-Corp is a one man company in a brand new market, signaling very little production, because of this Fal-corp will only produce 1 unit every two weeks. this means fal-corp will produce .0714 units per day

marginal cost's formula would be q= 10,200

that means producing more than one of a unit will cost 10,200 more.

Avg Cost and Marginal cost

1. Marginal revenue is greater at any number of produced units, because both MC and MR are constants the number produced does not matter.

2. the number of units sold daily is below the break even point, there fore the business must operate for a while before making a profit

3. yes the company will make more money if it produces more units per day, this is because R(q+1)-R(q) is much greater than C(q=1)-C(q)

4.  at q=n the cost of the company stays the same

5. decreasing average costs would benefit the company because it would make more and more profit of off each unit sold.

Part 4

1. Based on the information provided, if the company can stay at the rate it is going the company will be making a profit in a year and continue being profitable for as long as the market and costs stay the same.

The company will struggle the first year, but because both the companies costs and and revenues are linear that means barring an incident of market changes no matter what quantity is being produced and sold, after 24 units everything will be profit.