large break-even and output ealeulations24 Ralph' seost eurve is pieee-wise linear. For output of 0 s q s 1,000 units it is given by C(q) = 1,000 + 6q; for 1,000 s q s 2,000 it is given by C(q) = 3,000 + 4q;

and for 2,000 s q it is given by C(q) = -5,000 + 8q.

a] Plot Ralph's eost eurve.

b] Suppose the selling price is P = 7 per unit. Plot the implied total revenue eurve on your graph in [a]; also loeate Ralph's break-even point. Repeat for cases where the selling priee is P = 8 and P = 9.

e] Again assume the selling priee is P = 7. Loeate Ralph's optimal output.

d] Now approximate Ralph's eost eurve with an LLA of 3,000 + 4q; notice this approximation is eonsistent with the optimal output chosen above as weIl as the original break-even ealeulation. Suppose the seIling price unexpeetedly drops to P

= 4.8. Using the LLA of 3,000 + 4q, ealeulate Ralph's best choice of output

(somewhere between shutdown and a maximum of 2,000 units).

e] What mistake has Ralph made in part [d] above?

AppendixLO1