The demand and cost function for a company are estimated to be as follows: P = 100 - Q TC = 50 + 80Q -10Q2 + 0.6Q3 What price should the company charge if it wants to maximize its profit in the short run? What price should it charge if it wants to maximize its revenue in the short run
The demand and cost function for a company are estimated to be as follows: P = 100 - Q TC = 50 + 80Q -10Q2 + 0.6Q3 What price should the company charge if it wants to maximize its profit in the short run? What price should it charge if it wants to maximize its revenue in the short run
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 1E
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- The demand and cost function for a company are estimated to be as follows:
P = 100 - Q
TC = 50 + 80Q -10Q2 + 0.6Q3
- What price should the company charge if it wants to maximize its profit in the short run?
- What price should it charge if it wants to maximize its revenue in the short run
Suppose the company lacks confidence in the accuracy of cost estimates expressed in a cubic equation and simply wants to use a linear approximation. Suggest a linear representation of this cubic equation. What difference would it make on the recommended profit-maximizing and revenue-maximizing prices
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Step 1: Introduction
VIEWStep 2: Part (a) Calculating price the company should charge to maximize its profit in the short run.
VIEWStep 3: Part (b) Calculating price the company should charge to maximize its revenue in the short run.
VIEWStep 4: Part (c) Linear approximation for cubic cost equation.
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