A firm has a supply function given by S(p) = 4p. Its fixed costs are 100.
If the price changes from 10 to 20, what is the change in its profits? Show your working clearly
Change in profits = Total Revenue - Total Cost
Total Revenue = Price x Quantity
Total Cost = Fixed Cost + Variable Cost
Price = 10 to 20
Quantity = S(p) = 4p
Total Revenue = (20 x 4p) - (10 x 4p)
Total Revenue = 80p - 40p
Total Revenue = 40p
Total Cost = Fixed Cost + Variable Cost
Total Cost = 100 + (4p x 10)
Total Cost = 100 + 40p
Total Cost = 140p
Change in profits = Total Revenue - Total Cost
Change in profits = 40p - 140p
Change in profits = -100