he second-largest public utility in the nation is the sole provider of electricity in 32 counties of southern Florida. To meet the monthly demand for electricity in these counties, which is given by the inverse demand function P = 1,200 − 4Q, the utility company has set up two electric generating facilities: Q1 kilowatts are produced at facility 1 and Q2 kilowatts are produced at facility 2 (so Q = Q1 + Q2). The costs of producing electricity at each facility are given by C1(Q1) = 8,000 + 6Q1 2 and C2(Q2) = 6,000 + 3Q2 2, respectively. Determine the profit-maximizing amounts of electricity to produce at the two facilities, the optimal price, and the utility company’s profits. (LO1, LO8)
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The second-largest public utility in the nation is the sole provider of electricity in 32
counties of southern Florida. To meet the monthly
which is given by the inverse demand function P = 1,200 − 4Q, the utility company
has set up two electric generating facilities: Q1 kilowatts are produced at facility 1 and
Q2 kilowatts are produced at facility 2 (so Q = Q1 + Q2). The costs of producing electricity
at each facility are given by C1(Q1) = 8,000 + 6Q1
2 and C2(Q2) = 6,000 + 3Q2
2,
respectively. Determine the profit-maximizing amounts of electricity to produce at the
two facilities, the optimal price, and the utility company’s profits. (LO1, LO8)
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- . The second-largest public utility in the nation is the sole provider of electricity in 32 counties of southern Florida. To meet the monthly demand for electricity in these counties, which is given by the inverse demand function P = 1,200 − 4Q, the utility company has set up two electric generating facilities: Q1 kilowatts are produced at facility 1 and Q2 kilowatts are produced at facility 2 (so Q = Q1 + Q2). The costs of producing electricity at each facility are given by C1(Q1) = 8,000 + 6Q21and C2(Q2) = 6,000 + 3Q22, respectively. Determine the profit-maximizing amounts of electricity to produce at the two facilities, the optimal price, and the utility company’s profits.[Suppose] A Cmpany is the sole provider of electricity in the various districts of Dubai. To meet the monthly demand for electricity in these districts, which is given by the inverse demand function: P = 1,200 − 4Q, the company has set up two electric generating facilities: Q1 kilowatts are produced at facility 1 and Q2 kilowatts are produced at facility 2; where Q = Q1 + Q2. The costs of producing electricity at each facility are given by C1(Q1) = 8,000 + 6Q1 C2(Q2) = 6,000 + 3Q2 + 5Q22 What is the MR function? What is the MC function of each facility? What is the MC function of the firm?[Suppose] A Cmpany is the sole provider of electricity in the various districts of Dubai. To meet the monthly demand for electricity in these districts, which is given by the inverse demand function: P = 1,200 − 4Q, the company has set up two electric generating facilities: Q1 kilowatts are produced at facility 1 and Q2 kilowatts are produced at facility 2; where Q = Q1 + Q2. The costs of producing electricity at each facility are given by C1(Q1) = 8,000 + 6Q1 C2(Q2) = 6,000 + 3Q2 + 5Q22 Calculate the profit maximizing output levels of each factory?
- [Suppose] A Cmpany is the sole provider of electricity in the various districts of Dubai. To meet the monthly demand for electricity in these districts, which is given by the inverse demand function: P = 1,200 − 4Q, the company has set up two electric generating facilities: Q1 kilowatts are produced at facility 1 and Q2 kilowatts are produced at facility 2; where Q = Q1 + Q2. The costs of producing electricity at each facility are given by C1(Q1) = 8,000 + 6Q1 C2(Q2) = 6,000 + 3Q2 + 5Q22 Calculate the profit maximizing output levels of each factory? What is the profit maximizing level of price? What is the maximum profit?Suppose that Kenya Railways serves two major separate customers, namely: urban users and rural users of the railway line. The company can charge different prices to these two customers. Suppose that the total cost for running trips by Kenya Railways is given by the following cost function: C= 25+10Q Where: C = total cost Q = total output of trips made by the railway line The inverse demand functions for the two customers are given as follows: P1 = 40-5Q1 P2 =90-2Q2 Where: p1 = Price charged to urban users; and is number of trips by urban users p2 = Price charged to rural users; and is number of trips by rural users Required: How many trips should Kenya Railway serve in each market and what price should the firm charge in each market? Compute the profits of Kenya Railways without price discrimination From your knowledge of the relationships between various costs of production, fill in the blanks of Table 1 below: Table 1 Q TC…Bluth’s Bananas is considering expanding its retail operations for its one-of-a-kind frozen banana stands on Jones Beach, which is 10 kilometers long. Bluth’s Bananas estimates that the typical day has 2,000 visitors to the beach, spread uniformly, and that each will demand a single frozen banana provided the price plus any disutility of traveling to a stand does not exceed $6. To visit a stand a beach goer incurs a disutility of $0.50 for each 1/4 kilometer they have to walk to reach a stand. Each Bluth Banana costs $0.75 to make and each stand requires an operating fee to be paid to the city of $50 per day. Determine the equilibrium number of stands Bluth’s Bananas should operate on the beach given it is not in competition with any other firm. Determine the profit maximizing price for the bananas and calculate the profit realized by BB in equilibrium.
- You are a medical group manager. Some market research has suggested that the price elasticity of demand for the services of your physicians is −4.1. The marginal cost for the average unit of physician service in your group is approximately $536. A. Using the economic pricing model formula, calculate your profit-maximizing price for each unit of physician services. B. Suppose that your medical group is considering new contracts with two particular businesses to provide physician services to their employees. If the marginal cost for each service unit is the same as with the rest of your customers, but the price elasticity of demand from the first new business customers is −0.9, and the second group of business customers is −4.4, how would that change your profit-maximizing price for each of the new groups? Would you recommend that your medical group obtain contracts with both new groups, just one of them or none? Explain your reasoning. C. In order to maximize your profits, what specific…Suppose that two European electronics companies, Siemens (Firm S) and Alcatel-Lucent (Firm T), jointly hold a patent on a component used in airport radar systems. - Demand for the component is given by the following function \[ P=1,000-Q \] - The total cost functions of manufacturing and selling the component for the respective firms are \[ \begin{array}{c} T C_{S}=70,000+5 Q_{S}+0.25 Q_{S}^{2} \\ T C_{T}=110,000+5 Q_{T}+0.15 Q_{T}^{2} \end{array} \] Assume that the firms agreed to form cartel and calculate the joint profit.You are an executive for Super Computer, Inc. (SC), which rents out super computers. SC receives a fixed rental payment per time period in exchange for the right to unlimited computing at a rate of P cents per second. SC has two types of potential customers of equal number—10 businesses and 10 academic institutions. Each business customer has the demand function: Q=14−P, where Q is in millions of seconds per month; each academic institution has the demand: Q=10−P. The marginal cost to SC of additional computing is 2 cents per second, regardless of volume. a. Suppose that you could separate business and academic customers. What rental fee and usage fee would you charge each group? What would be your profits? (Round all answers to the nearest integer) For business users, the rental fee would be$720,000per month and the usage fee is 2 cents per second. For academic institutions, the rental fee would be $320,000 per month and the usage fee is 2 cents per second.…
- You are an executive for Super Computer, Inc. (SC), which rents out super computers. SC receives a fixed rental payment per time period in exchange for the right to unlimited computing at a rate of P cents per second. SC has two types of potential customers of equal number—10 businesses and 10 academic institutions. Each business customer has the demand function: Q=14−P, where Q is in millions of seconds per month; each academic institution has the demand: Q=10−P. The marginal cost to SC of additional computing is 2 cents per second, regardless of volume. a. Suppose that you could separate business and academic customers. What rental fee and usage fee would you charge each group? What would be your profits? (Round all answers to the nearest integer) For business users, the rental fee would be$720,000per month and the usage fee is 2 cents per second. For academic institutions, the rental fee would be $320,000 per month and the usage fee is 2 cents per second.…Exercise 4.6 An econometrician hired to analyse a local golf course has determined that there are two types of golfers, the regular and the occasional. The annual demand for games from regular players is given by QH = 24 – 0.3P, where P is the price of a round of golf. On the other hand, the annual demand for occasional items is given by QO = 10 – 0.1P. The marginal cost and the average total cost per item are equal to €20. a) If you could distinguish between regular and casual players, what price would be set for each type? How many games would each type of player play? How much profit could the golf course generate? Represent graphically. b) As an alternative to the discrimination of third degree prices, those in charge consider a double tranche rate according to which the members can play as many games as they wish at a price of € 20 per game. How much profit will the golf course generate if it charges all players the same annual fee for becoming a member of the club? What if you…A manager of a nightclub realizes that demand for drinks is more elastic among students and is trying to determine the optimal pricing schedule. Specifically, he estimates the following average demand for his customer types: Under 25: qr =18-5p Over 25: q=10-2p The two age groups visit the nightclub in equal numbers on average. Assume that drinks cost the club $2 to make. If the manager can charge a separate entry fee and a price per drink for each group, what two-part price will the manager set for reach group. Now suppose that once again it is impossible to identify which group the customers belong. Suppose the manager lowers the price of drinks to equal to marginal cost and still wanted to attract both customers, what entry fee would the manager set? Compare the profits earned in parts a) to d). Which scheme would you choose if you could not identify customer type and which would you choose if you could identify customer type.