A company produces a special new type of TV. The company has fixed costs of $498,000, and it costs $1300 to produce each TV. The company projects that if it charges a price of $2400 for the TV, it will be able to sell 700 TVs. If the company wants to sell 750 TVs, however, it must lower the price to $2100. Assume a linear demand What is the maximum profit that can be reached? It is
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- The Potomac Range Corporation manufactures a line of microwave ovens costing $500 each. Its sales have averaged about 6,000 units per month during the past year. In August, Potomac’s closest competitor, Spring City Stove Works, cut its price for a closely competitive model from $600 to $450. Potomac noticed that its sales volume declined to 4,500 units per month after Spring City announced its price cut. a. What is the arc cross elasticity of demand between Potomac’s oven and the competitive Spring City model? b. Would you say that these two firms are very close competitors? What other factors could have influenced the observed relationship? c. If Potomac knows that the arc price elasticity of demand for its ovens is −3.0, what price would Potomac have to charge to sell the same number of units it did before the Spring City price cut?PNG’s managers estimate that a 50% increase in price would cause an 80% reduction in the quantity of product sold. Total fixed costs for the product are $5000 and total variable costs are $4000, based on production of 400 units. The following values may be useful. 1n (0.2) = –1.609 1n (1.5) = 0.405 1n (0.5) = –0.693 1n (4000) = 8.294 1n (0.8) = –0.223 1n (5000) = 8.517 What is PNG’s price elasticity of demand? –0.252 +0.322 –3.973 +3.108The ABC Co. manufactures digital clock radios and sells on average 3,000 units monthly at $25 each to retail stores. Its closest competitor produces a similar type of radio that sells for $28. a. If the demand for ABC’s product has an elasticity coefficient of −3, how many will it sell per month if the price is lowered to $22? b. The competitor decreases its price to $24. If cross-price elasticity between the two radios is 0.3, what will ABC’s monthly sales be?
- You manage a movie theater that can handle up to 8,000 patrons per week. The current demand, price, and elasticity for ticket sales, popcorn, soda, and candy are given in below. The theater keeps 45 percent of ticket revenues. Unit cost per ticket, popcorn sales, candy sales, and soda sales are also given. Assuming linear demand curves, how can the theater maximize profits? Demand for foods is the fraction of patrons who purchase the given food. Elasticity Current Price Demand Cost Ticket 3 8 3000 0 Popcorn 1.3 3.5 0.5 0.4 Soda 1.5 3 0.6 0.6 Candy 2.5 2.5 0.2 1If demand function is given by P = 40 - 2Q then what is the procedure to get marginal revnue ?A multi-plex theatre area is experiencing a decline in the number of ticketssold, falling revenues, and inadequate profits. The average price of a ticketis $20 and there are 1000 tickets sold daily on average. The estimated priceelasticity of demand is 1.5 and the theatre currently operating at an averageof 75 percent of capacity. There are three proposals in front of themanagement to consider:Proposal A: Proposal B: an aggressive advertising campaign (which is expected to reduce the elasticity of demand to 1), and a 10 percent increase in the average price of a ticket.
- 1. Estimated Demand. You are the manager of a firm that sells packs of coffee pods for coffee makers. You typically sell the packs for $24 and sell an average of 2,470 packs per month. You decide to raise the price to $28 per pack. When you do this your monthly sales fall to 1,482 packs per month. a. Assuming that your firm’s demand function is linear (i.e., takes the form QP=a-bP), calculate the linear demand function for the packs 2. Markups and elasticities. The marginal cost (MC) of producing your product is $16 a. Using the estimated demand curve from the previous question, calculate the point price elasticities of demand at the two price from question 1 b. Use the markups and elasticities and indicate whether the two prices are higher or lower than the profit maximizing price. NOTE: YOU DO NOT NEED TO CALCULATE THE PROFIT MAXIMIZING PRICE YET.The Potomac Range Corporation manufactures a line of microwave ovens costing $500 each. Its sales have averaged about 6,000 units per month during the past year. In August, Potomac's closest competitor, Spring City Stove Works, cut its price for a closely competitive model from $600 to $545. Potomac noticed that its sales volume declined to 4,500 units per month after Spring City announced its price cut. a) What is the arc cross elasticity of demand between Potomac's oven and the competitive Spring City model? b) If Potomac knows that the arc price elasticity of demand for its ovens is −2.0, what price would Potomac have to charge to sell the same number of units it did before the Spring City price cut?Suppose demand and supply curves for you company’s product are given by:QD = 10 -XP QS =5 +YP You will need to find value for X between [0.1 -3] and Y between [0.1 -3] based on the elasticity of demand and supply. This elasticity in turn depends on the type of product, marketstructure and competitive advantage of the company. In this case, the product is an electric car and the price elasticity of demand is high.
- A company produces a special new type of TV. The company has fixed costs of $451,000, and it costs $1000 to produce each TV. The company projects that if it charges a price of $2600 for the TV, it will be able to sell 800 TVs. If the company wants to sell 850 TVs, however, it must lower the price to $2300. Assume a linear demand. If the company sets the price at $3800, how much profit can it earn? It can expect to earn/lose $enter your response here. (Round answer to nearest dollar.)A hair salon has very loyal customers and faces a weekly demand for blowouts equal to qD = 1,040 – 20P.The salon has weekly total cost of TC(q)=0.05q2+20q+500. g) The hair Salon instead has market power. Suppos the firm charges all customers the same price for a blowout. Find the profit maximizing level ofoutput (q*) and price (p*).h) Compute the price elasticity of demand at q* and show that at q* MR(q*) = p*(1+1/e) = MC(q*)i) Compute the consumer surplus created by the Salon and the profit of the firm.A mechanical pencil manufacturer sells 3570 pencils per quarter for $0 per pencil. The price elasticity for the product was estimated to be 3.7. If the manufacturer decides to change the price by 18 percent then by what percentage should the quantity sold change? Report your percentage as a whole number such that 20 percent would be reported as 20 NOT 0.2