A price-setting firm faces the following estimated demand and average variable cost functions: Qd= 800,000 − 2,000P + 0.7M + 4,000PR AVC = 500−0.03Q + 0.000001Q2 where Qd is the 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 $53. Total fixed cost is $2,600,000. What is the profit-maximizing choice of output? a. 8,000 units b. 20,000 units c. 0 units, the firm shuts down
A price-setting firm faces the following estimated demand and average variable cost functions: Qd= 800,000 − 2,000P + 0.7M + 4,000PR AVC = 500−0.03Q + 0.000001Q2 where Qd is the 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 $53. Total fixed cost is $2,600,000. What is the profit-maximizing choice of output? a. 8,000 units b. 20,000 units c. 0 units, the firm shuts down
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
Chapter9: Applications Of Cost Theory
Section: Chapter Questions
Problem 1.5CE
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Question
A
Qd= 800,000 − 2,000P + 0.7M + 4,000PR
AVC = 500−0.03Q + 0.000001Q2
where Qd is the 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 $53. Total fixed cost is $2,600,000. What is the profit-maximizing choice of output?
a.
8,000 units
b.
20,000 units
c.
0 units, the firm shuts down
d.
10,000 units
e.
12,000 units
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