Question

(c) XYZ company is considering rewarding employees with profit sharing for good performance. Without the sharing plan, XYZ company's total cost function is: $TC(Q) = 250Q + \frac{Q^2}{4}$ and its marginal cost function is: $MC(Q) = 250 + \frac{Q}{2}$. XYZ company can sell all its output for $500. Calculate XYZ's optimal output level. What is its level of profits? If XYZ firm implements the profit sharing plan, its total cost function is: $TC(Q) = 125Q + \frac{Q^2}{4}$ and its marginal cost function is: $MC(Q) = 125 + \frac{Q}{2}$. If the profit sharing plan entitles his employees to 25% of the profits, should Ty institute the plan (Hint: Assume competitive profit maximization occurs at MC=P)? (11 marks) [Total: 25 Marks]

          (c) XYZ company is considering rewarding employees with profit sharing for good performance. Without the sharing plan, XYZ company's total cost function is: $TC(Q) = 250Q + \frac{Q^2}{4}$ and its marginal cost function is: $MC(Q) = 250 + \frac{Q}{2}$. XYZ company can sell all its output for $500. Calculate XYZ's optimal output level. What is its level of profits? If XYZ firm implements the profit sharing plan, its total cost function is: $TC(Q) = 125Q + \frac{Q^2}{4}$ and its marginal cost function is: $MC(Q) = 125 + \frac{Q}{2}$. If the profit sharing plan entitles his employees to 25% of the profits, should Ty institute the plan (Hint: Assume competitive profit maximization occurs at MC=P)? (11 marks) [Total: 25 Marks]

(c) XYZ company is considering rewarding employees with profit sharing for good performance. Without the sharing plan, XYZ company's total cost function is: TC(Q) = 250Q + (Q^2)/(4) and its marginal cost function is: MC(Q) = 250 + (Q)/(2). XYZ company can sell all its output for 500. Calculate XYZ's optimal output level. What is its level of profits? If XYZ firm implements the profit sharing plan, its total cost function is:TC(Q) = 125Q + (Q^2)/(4)and its marginal cost function is:MC(Q) = 125 + (Q)/(2). If the profit sharing plan entitles his employees to 25% of the profits, should Ty institute the plan (Hint: Assume competitive profit maximization occurs at MC=P)? (11 marks) [Total: 25 Marks]

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