UNIT 6The El Dorado Star is the only newspaper in El Dorado, New Mexico. Certainly, the Star competes with The Wall Street Journal, USA Today, and the New York Times for national news reporting, but t

UNIT 6

The El Dorado Star is the only newspaper in El Dorado, New Mexico. Certainly, the Star competes with The Wall Street Journal, USA Today, and the New York Times for national news reporting, but the Star offers readers stories of local interest, such as local news, weather, high-school sporting events, and so on. The El Dorado Star faces the revenue and cost schedules shown in the spreadsheet that follows:

A template for the spreadsheet is provided in the Course Materials.  You may download my template or create your own.  Since we are using dollars and cents, be sure to go out two decimal places on your calculations.  Add columns to show, respectively, marginal cost (MC), marginal revenue (MR), and total profit.

Place your completed spreadsheet in the Drop Box, and use it to answer the following questions.  Submission of your template is worth 10 points.

Number of newspapers per day (Q)

Total revenue (including advertising revenues) per day (TR)

Total cost per day (TC)

0

0

3500

1000

3250

3600

2000

4250

3700

3000

4750

3860

4000

5000

4020

5000

5200

4300

6000

5375

4500

7000

5400

4590

8000

5375

4810

9000

5225

5050

1. What is the value of MR when Q = 8,000?

2. What is the value of MC when Q = 8,000?

3. How many papers should the manager of the El Dorado Star print and sell daily?  Explain your choice in 25 – 50 words.

4. How much profit (or loss) will the Star earn at the level of output you chose in #3?

5. At the profit-maximizing output level you reported in question 3, is the El Dorado Star making the greatest possible amount of TOTAL REVENUE? Explain in 50-100 words why or why not.

6. What is total fixed cost for Star?

7. If Star's total fixed costs were to DOUBLE for some reason, how much profit (or loss) does Star make when fixed costs are doubled?

8. Given your answer in #7, should the Star shut down, why or why not?  If they should continue to produce, how many papers should they produce?  Explain your choice in 25-50 words.