A faculty member sells Gatorade at football games. He finds that if he raises his selling price by $1, he sells 6 less bottles each week. He turns over the operation to a Managerial Economics student for a week. The goal is to maximize revenue since the faculty member has a vast supply of Gatorade, and any unsold bottles can be sold in future weeks. The student takes over the operation for a week. She says she sold at the revenue-maximizing price of $4 per bottle. How many units sold? Show your work/thought process

A faculty member sells Gatorade at football games. He finds that if he raises his selling price by $1, he sells 6 less bottles each week. He turns over the operation to a Managerial Economics student for a week. The goal is to maximize revenue since the faculty member has a vast supply of Gatorade, and any unsold bottles can be sold in future weeks. The student takes over the operation for a week. She says she sold at the revenue-maximizing price of $4 per bottle. How many units sold? Show your work/thought process

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter12: The Partial Equilibrium Competitive Model

Section: Chapter Questions

Problem 12.14P

See similar textbooks

Similar questions

You are the manager of a midsized company that assembles personal computers. You purchase most components – such as random access memory (RAM) – in a competitive market. Based on your marketing research, consumers earning over $80,000 purchase 1.5 times more RAM than consumers with lower incomes. One morning, you pick up a copy of The Wall Street Journal and read an article indicating that input components for RAM are expected to rise in price, forcing manufacturers to produce RAM at a higher unit cost.Based on this information, what can you expect to happen to the price you pay for random access memory?The price _____ for random access memory.Would your answer change if, in addition to this change in RAM input prices, the article indicated that consumer incomes are expected to fall over the next two years as the economy dips into recession? Maybe - price may ultimately increase or decrease. Yes - price will now decrease. Yes - price will now be unchanged. No - price…
You are the manager of a midsized company that assembles personal computers. You purchase most components – such as random access memory (RAM) – in a competitive market. Based on your marketing research, consumers earning over RM80,000 purchase 1.5 times more RAM than consumers with lower incomes. One morning, you pick up a copy of The Wall Street Journal and read an article indicating that input components for RAM are expected to rise in price, forcing manufacturers to produce RAM at a higher unit cost. Based on curve, discuss the following scenarios. Question 1: Based on this information, what can you expect to happen to the price you pay for random access memory (RAM)? Question 2: In addition to this change in RAM input prices, the article indicated that consumer incomes are expected to fall over the next two years as the economy dips into recession?
As the manager of Smith Construction, you need to make a decision on the number of homes to build in a new residential area where you are the only builder. Unfortunately, you must build the homes before you learn how strong demand is for homes in this large neighborhood. There is a 80 percent chance of low demand and a 20 percent chance of high demand. The corresponding (inverse) demand functions for these two scenarios are P = 300,000 −300Q and P = 800,000 −200Q, respectively. Your cost function is C(Q) = 180,000 + 260,000Q. How many new homes should you build, and what profits can you expect? Give typing answer with explanation and conclusion
You have just taken over the job of senior product manager for a line of Consumer Home Routers at Cisco. On your first day at work, your new boss walks into your office and informs you that your product line will be discontinued and replaced by a revolutionary new product line on October 1 of the same year. She also tells you that she wants you to raise prices on your existing product line by 20% in order to protect profitability during the transition. After a moment of reflection, you tell her that you need a day to gather some information and will respond to her at that time. You go to a number of sources including field sales VPs, market research, other product managers, and an external consulting firm, and ask them how responsive customers have been to changes in prices in the past. They tell you that a 10% increase in price always leads to a 5% decrease in sales volume. The next day you walk into your boss’s office. What is your recommendation and what is your reasoning?
As the manager of Smith Construction, you need to make a decision on the number of homes to build in a new residential area where you are the only builder. Unfortunately, you must build the homes before you learn how strong demand is for homes in this large neighborhood. There is a 60 percent chance of low demand and a 40 percent chance of high demand. The corresponding (inverse) demand functions for these two scenarios are P = 300,000 – 400Q and P = 500,000 – 275Q, respectively. Your cost function is C(Q) = 140,000 + 240,000Q. How many new homes should you build, and what profits can you expect? Number of homes you should build: homes Profits you can expect: $
As the manager of Smith Construction, you need to make a decision on the number of homes to build in a new residential area where you are the only builder. Unfortunately, you must build the homes before you learn how strong demand is for homes in this large neighborhood. There is a 40 percent chance of low demand and a 60 percent chance of high demand. The corresponding (inverse) demand functions for these two scenarios are P = 500,000 −200Q and P = 900,000 −125Q, respectively. Your cost function is C(Q) = 105,000 + 631,500Q. How many new homes should you build, and what profits can you expect? Number of homes you should build: homes Profits you can expect: $
As the manager of Smith Construction, you need to make a decision on the number of homes to build in a new residential area where you are the only builder. Unfortunately, you must build the homes before you learn how strong demand is for homes in this large neighborhood. There is a 40 percent chance of low demand and a 60 percent chance of high demand. The corresponding (inverse) demand functions for these two scenarios are P = 400,000 −450Q and P = 600,000 −250Q, respectively. Your cost function is C(Q) = 170,000 + 256,000Q. How many new homes should you build, and what profits can you expect? a. Number of homes you should build: _____ homes b. Profits you can expect: $
You are the manager of a small pharmaceutical company that received a patent on a new drug three years ago. Despite strong sales ($150 million last year) and a low marginal cost of producing the product ($0.50 per pill), your company has yet to show a profit from selling the drug. This is, in part, due to the fact that the company spent $1.7 billion developing the drug and obtaining FDA approval. An economist has estimated that, at the current price of $1.50 per pill, the own price elasticity of demand for the drug is −2. Based on this information, what can you do to boost profits? multiple choice Leave price unchanged - you are at maximum profits Reduce price Increase price
You are the general manager of a firm that manufactures personal computers. Due to a soft economy, demand for PCs has dropped 50 percent from the previous year. The sales manager of your company has identified only one potential client, who has received several quotes for 10,000 new PCs. According to the sales manager, the client is willing to pay $800 each for 10,000 new PCs. Your production line is currently idle, so you can easily produce the 10,000 units. The accounting department has provided you with the following information about the unit (or average) cost of producing three potential quantities of PCs: Based on this information, should you accept the offer to produce 10,000 PCs at $800 each? Explain.
The manager of a large apartment complex knows from experience that 100 units will be occupied if the rent is 414 dollars per month. A market survey suggests that, on the average, one additional unit will remain vacant for each 9 dollar increase in rent. Similarly, one additional unit will be occupied for each 9 dollar decrease in rent. What rent should the manager charge to maximize revenue?
You are the manager of a train company. Recently total sales have been a bit low and you are now considering means to give sales a boost. Market research has shown that currently the price of train tickets is historically low. Market research has also shown that the demand curve for train tickets is downward sloping. You may assume that your company is not a price taker on the market. i) One of your colleagues has suggested that it is important to lower the price of train tickets. In that case, she argues, the demand will increase. Do you agree with her? Explain why. ii) She continues her argument by concluding that if the demand goes up, the total value of sales of train tickets should therefore increase. Do you agree with her? Explain why.
You are the manager of a small pharmaceutical company that received a patent on a new drug that enhance the immune system three years ago. Despite strong sales (GH¢125 million last year) and a low marginal costof producing the product (GH¢0.25 per pill), your company has yet to show a profit from selling the drug. This is, in part, due to the fact that the company spent GH¢1.2 billion developing the drug and obtainingFood and Drugs Authority approval. An economist has estimated that, at the current price of GH¢1.25 per pill, the own price elasticity of demand for the drug is -2.5. Based on this information, what can you do to boost profits? Explain.