firm with market power faces the following estimated demand and average variable cost functions: Qd = 39,000 − 500P + 0.4M −8,000PR AVC = 30 − 0.005Q + 0.0000005Q2 where Qd is quantity demanded, P is price, M is income, and PR is the price of a related good. The firm expects income to be $40,000 and PR to be $2. Total fixed cost is $100,000. What is the profit-maximizing choice of output(hint: derive the total revenue function first based on the demand function and the formula TR=P*Q)? a. 0 units, the firm shuts down b. 8,000 units c. 12,000 units d. 16,000 units e. 10,000 units
firm with market power faces the following estimated demand and average variable cost functions: Qd = 39,000 − 500P + 0.4M −8,000PR AVC = 30 − 0.005Q + 0.0000005Q2 where Qd is quantity demanded, P is price, M is income, and PR is the price of a related good. The firm expects income to be $40,000 and PR to be $2. Total fixed cost is $100,000. What is the profit-maximizing choice of output(hint: derive the total revenue function first based on the demand function and the formula TR=P*Q)? a. 0 units, the firm shuts down b. 8,000 units c. 12,000 units d. 16,000 units e. 10,000 units
Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
14th Edition
ISBN:9781305506381
Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Chapter11: Price And Output Determination: Monopoly And Dominant Firms
Section: Chapter Questions
Problem 3E
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A firm with market power faces the following estimated demand and
Qd = 39,000 − 500P + 0.4M −8,000PR
AVC = 30 − 0.005Q + 0.0000005Q2
where Qd is quantity demanded, P is price, M is income, and PR is the price of a related good. The firm expects income to be $40,000 and PR to be $2. Total fixed cost is $100,000. What is the profit-maximizing choice of output(hint: derive the total revenue function first based on the demand function and the formula TR=P*Q)?
a.
0 units, the firm shuts down
b.
8,000 units
c.
12,000 units
d.
16,000 units
e.
10,000 units
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