3. Do you expect this profit level to continue in subsequent years? Why or why not?
As the marginal expense of manufacturing is more than the marginal income, it is not feasible for the company to manufacture a positive amount of output although it has got monopoly power by the patent.
During the 1st year, the company has incurred the fixed expense of 120 that it can 't do anything about. But, in the following years the company would go out this market and consequently prevent the fixed expenses incurred. Therefore, the company then would earn profits equal to zero.
2. Greener Grass Company (GGC) competes with its major competitor, Better Lawns and Gardens (BLG), in the delivery and installing of in-ground lawn watering systems in
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For MR = 0, Qw= 3498.65/0.3294 = 10621.28 and Qe= 2719.8714/0.065 = 41844.18. Hence Q = 52465.46.
For MR = 2719.8714, Qw = 2364.23 and Qe =0 .Hence Q=2364.23.
The MR curve is given by,
(MR-0) = [(2719.8714- 0)/(2364.23 - 52465.46)]*(Q-52465.46) = (-0.054)*( Q-52465.46),
i.e. MR = 2833.13484 - 0.054Q.
P = 2833.13484 - 0.027Q
Graphically, we can observe that the profit maximizing quantity is Q*, at the intersection of the MR and MC curves.
Here Q*~32,400.
c. Confirm your quantity and price results algebraically.
The profit maximizing quantity is that level of Q, at which MR=MC.
MR = 2833.13484 - 0.054Q = MC= 755.363 + 0.01Q,
0.064Q = 2077.77184,
Q* = 32465.185.
P*=2833.13484 - 0.027Q* = 1956.574845.
d. Calculate the price elasticity of demand in each market and discuss these in relation to the prices to be charged in each market.
Elasticity in the western market is given by, ew = (dQw/dPw)*(Pw/Qw) ; dQw/dPw is the coefficient of ew = (dQw/dPw)*(Pw/Qw) = (-0.1647)*(1956.574845/32465.185) = -0.0099
Elasticity in the eastern market is, ee = (dQe/dPe)*(Pe/Qe) ; dQe/dPe is the coefficient of price in the approximated demand equation. ee = (dQe/dPe)*(Pe/Qe) = (-0.0325)*(1956.574845/32465.185) = -0.00196
The demand in the Eastern market is much more inelastic because the value of e is
BUS 475 Week 2 Knowledge Check 1. Compared with other approaches to business, the marketing concept is distinct in that it focuses on sales produces new products and services creates a broad assortment of products focuses on satisfying customers' needs 2.
2. Why is the demand for gasoline relatively inelastic, while the demand for Exxon's gasoline is relatively elastic?
is P = 150 - 2Q. The cost function for each firm is C(Q) = 6Q.
1. Revenue function of producing and selling x units of a product is: R(x) = 20 x −
managers, a new transfer price was determined that calìs for the stores and Wall Décor to split the profits on unframed prints 30/70 (30o/o to the store, 70o/o lo Wall Décor) and the profits on framed prints 50/50. The following additional terms were also agreed to: . "Profits" are defined as the store selling price less the ABC cost. . Stores do not share the profits from related products with Wall Décor. . Wall Décor will not seek to sell unframed and framed print items through anyone other than Greetings. . Wall Décor will work to decrease costs. . Greetings stores will not seek suppliers of prints other than Wall Décor. . Stores will keep the selling price of framed prints as it was before the change in transfer price. On average, stores will decrease the selling price of unframed prints to $20, with an expected increase in volume to 100,000 prints. Analyze how Wall Décor and the stores benefited from this new agreement. In your analysis, first (a) compute the profits of the stores and Wall Décor using traditional amounts related to pricing, cost,
___________________________________________________________________________ 1. A Ch3 Student: firm will maximize profit by producing that level of output at which A. the additional revenue from the last unit sold exceeds the additional cost of the last unit by the largest amount. B. the additional revenue from the last unit sold equals the additional cost of the last unit. C. total revenue exceeds total cost by the largest amount. D. total revenue equals total cost. E. both b
but if we try to find the reduced price here using price elasticity estimator formula, for that we need to consider (P-MC)/P=1/|e|, that means price elasticity of demand is -1.
(d) Interpret the following Cross-Price Elasticities of Demand (XED) and explain the relationship between these goods. XED= +0.64 and XED= -2.6
3. What do you expect the financial position of the business to be in 2006?
Without including depreciation costs, the firm would need to sell only 2,700 mowers to break even i.e. to cover its fixed operating costs. At this point the operating cash flow would be zero. Cash-break even does not account for the cost of the project nor the cost of capital.
The firm’s marketing manager responds with a memo pointing out that the price elasticity of demand for the firm’s product is about -0.5. Why is this fact relevant?
The demand curve for this equation has x and y intercepts of Q = 100 and P = 1000. Its slope is -10. Its MR is MR = 1000 - 20 Q and its MR curve has x and y intercepts of Q = 50 and P = $1,000 and slope of -20. To derive the
Elasticity is not confined to demand curves as the demand of a product consumed is not always related to the price of the item. For instance the demand of meat products may be high during holiday seasons, while the price is the same throughout the year and vice versa.
This simple formula has a problem, however. It yields different values for Ed depending on whether Qd and Pd are the original or final values for quantity and price. This formula is usually valid either way as long as you are consistent and choose only original values or only final values.