is the sole supplier of solar panels in SuI supply solar panels at a constant marginal cost MC of $10 per panel. There are two different categories of customers of solar energy, business and residential. • The businesses' demand for solar panels is QB(P) = 240 – 3P. • The residential demand for solar panels is QR(P) = 80 – 5P. olaris has no fixed costs and can a) Tax per unit (TU): The government decides to tax Solaris at $2 per panel sold. Find the new optimal price Py and quantity Q#u that Solaris chooses, and compute its profit ny. Finally, compute the tax revenue TRTU. (10 points)
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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, Potomacs 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. What is the arc cross elasticity of demand between Potomacs oven and the competitive Spring City model? Would you say that these two firms are very dose competitors? What other factors could have influenced the observed relationship? 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?A cruise ship company offers two packages to its clients: an “economy” package and a “deluxe” package with more amenities to its higher-paying customers. The company estimates that its customers have the following demand functions: Economy package: Q(E) = 20,000 - 10PE Deluxe package: Q(D) = 5900 - 1.5PD The costs for the two services (as a function of the number of passengers) are: Economy passenger: C(QE) = 5000 + 100QE + 0.1Q^2E Deluxe passenger: C(QD) = 5000 + 200QD + 6Q^2D What prices should the company set for the economy and deluxe packages? What are the number of passengers that the ship will have in each package, and how much profit does the company make per cruise? Now assume the ship has a maximum capacity of 4,000 people. How many spaces should be arranged for deluxe passengers and how many for economy? What prices should the company set for the two packages? What is the profit for the company now?An auto part manufacturer sells six different parts to automobile companies: spot lights (A), break lights (B), headlights (C), thermostat (D), fan ditch (E), and battery (F). Demand is expected to be within 2,000, 1,500, 1,800, 1,200, 1,000 and 1,000 units of each of the auto parts, respectively. The table that follows summarizes the revenues and material costs for each product: Auto Parts Produced A B C D E F Price per Unit 200 120 180 200 430 260 Material Cost per Unit 35 25 40 45 170 60 Each of these auto parts needs to be tested before being sold. Specifically, there are three different tests the protocol requires each part passes, before completing the quality check. Appropriate testing equipment is required for each test: T1, T2 and T3. Equipment T1 and T2 are available 100 hours per week each, while T3 is available only 80 hours per week. The time (in minutes) required per device for each of the three tests is…
- Seafood Salt Company wishes to third degree price discriminate between retail grocers (group A) and commercial users such as bakeries (Group B). The firm’s total cost schedule is TC = $5*QA + $20*QB. Demands for retail grocers and commercial users are, respectively, QA = 4,000*PA-3.0and QB = 100,000*PB-2. The profit-maximizing prices to charge Groups A and B areYou own a private parking lot near City University with a capacity of 600 cars. The demand for parking at this lot is estimated to be Q=1,000 - 2P, where Q is the number of customers with monthly parking passes and P is the monthly parking fee per car. 1)Derive your marginal revenue schedule. 2) What price generates the greatest revenues? Your fixed costs of operating the parking lot, such as the monthly lease paid to the landlord are £25,000 per month. In addition, your insurance company charges you £20 per car per month for liability coverage and the City of London charges you £30 per car per month as part of its policy to discourage the use of private cars in the city center. 3)What is your profit maximizing price?Tim's Tires sells tires under the firm's own brand name and private label tires to discount stores. The tires sold in both sub-markets are identical, and the marginal cost is constant at $15 per tire for both types. The firm has estimated the following demand curves for each of the markets: PB = 70 - 0.0005QB (brand name) PP = 20 - 0.0002QP (private label). Quantities are measured in thousands per month and price refers to the wholesale price. a) By selling the brand name and private label tires at different prices, is the firm is using first, second, or third degree price discrimination? b) With price discrimination, the firm's TOTAL profit is _______________ (assume fixed costs are zero). c) If the firm cannot price discriminate and must charge a single price in the market, the optimal price is and the optimal quantity is ________________. The firm's total profit in this case is approximately ________________(again, assume fixed costs are zero). d) When price discriminating, the…
- Zar Island Gas Company is the sole producer of natural gas in the remote island country of Zar. The company's operations are regulated by the State Energy Commission. The demand function for gas in Zar has been estimated as: P = 1,000 − .2Qwhere Q is output (measured in units) and P is price (measured in dollars per unit). Zar Island's cost function is: TC = 300,000 + 10QThe firm's asset base is $4 million.In the absence of any government price regulation, determine Zar Island's optimal (i) output level, (ii) selling price, (iii) total profits, and (iv) rate of return on its asset base.Apparel manufacturer Nike produces high-end and low-end versions of their running shirts. They estimate that the demands for their products are given by: High-end shirts: P = 130 - 2QH , andLow-end shirts: P = 80 - QL, where Q is measured in 1000 shirts, "H" denotes High-end and "L" denotes Low-end Both types of shirts are produced on the same production line in the same facility, so the marginal cost of producing and selling both types of shirts is constant at $30. Supposing that (i) the two demands are independent and (ii) Nike can produce and market the shirts such that the high- and low-end markets are successfully segmented, what are the profit-maximizing prices Nike would charge for each version?Answer Options:a) by the midpoint rule, PH = $65 and Pl = $40b) PH = $80 and PL = $55c) Nike will set price equal to marginal cost for both versionsd) PH = $130 and PL = $80he Pear Computer Company just developed a totally revolutionary new personal computer. Pear estimates that it will take competitors at least two years to produce equivalent products. The demand function for the computer is estimated to be P=2,500−500Q�=2,500−500� where Q� is millions of computers. The marginal (and average variable) cost of producing the computer is $900. Assuming Pear acts as a monopolist in its market, the profit-maximizing price and output levels are per computer and million computers, respectively. The total contribution to profits and fixed costs at this output level is million. Pear Computer is considering an alternative pricing strategy of price skimming. It plans to set the following schedule of prices over the coming two years: Complete the following table by calculating the contribution to profit and overhead for each of the 10 time periods and prices. Time Period Price Quantity Sold Total Contribution ($) (Million)…
- The industry demand function for bulk plastics is represented by the following equation:P = 800 - 20Qwhere Q represents millions of pounds of plastic.The total cost function for the industry, exclusive of a required return on invested capital, isTC = 300 + 500Q + 10Q2where Q represents millions of pounds of plastic.a. If this industry acts like a monopolist in the determination of price and output, compute the profit-maximizing level of price and output.b. What are total profits at this price and output level?c. Assume that this industry is composed of many (500) small firms, such that the demand function facing any individual firm isP = $620Compute the profit-maximizing level of price and output under these conditions (the industry’s total cost function remains unchanged).d. What are total profits, given your answer to Part (c)?e. Because of the risk of this industry, investors require a 15 percent rate of return on investment. Total industry investment amounts to $2 billion. If the…– A certain cleaning company cleans professional offices and believes its staff can clean up to 300 office units a week at a labor and supply cost of $58 per unit. Preliminary pricing surveys indicate that if that if the company charges $100 per unit, it will have clients for 300 units. For every $5 price increase it can expect a demand of 10 fewer units. Assume the demand, s, is a linear function of price p. Find an equation for demand as a function of price. Find the Revenue and Cost functions, both of which are dependent on price p. Write the Profit function. Using Desmos, graph the Revenue, Cost, and Profit functions on the same coordinate plane. Label the axes and the functions and use an appropriate scale. Find the break-even points graphically and confirm algebraically. Label the regions of profit and loss on the graph. Algebraically find the price that results in a maximum profit. Conclusion: A price of $_________ results in a quantity of _____________ units…Can you help with parts c,d, and e please? The estimated daily demand for river corssings on a proposed new bridge is: Qd = 100,000 - 20,000P where Qd is the quantity demanded measured in number of daily crossings and P is the price(toll) per crossing in dollars. Engineers estimate that constructing the new bridge will result in a fixed cost of $1.2 billion or $120,000 per day over the life of the bridge. Once constructed, there are no marginal costs and variable costs associated with the bridge's use. Based upon the above information, answer the following questions: a. If a private company were to build the bridge, what would be the profit-maximizing number of daily crossings? b. What price per crossing(toll) would the profit-maximizing company establish? c. What would be the socially optimal number of daily crossings? d. What deadweight loss would exist given your answers to part (a) and (b)? e. Would a profit-maximizing company build the bridge?