b. Market for Gidgets: q = 50,000- 10*p 2 (think about other functional forms and how you
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Question:
b. Market for Gidgets:
q = 50,000- 10*p2 (think about other functional forms and how you might represent...)
Revenue = p*q
Cost structure:
Fixed Costs: = $50,000
Variable costs = $5*q(how would you change cost structure for economies of size or scale?)
Total Costs = $50,000+$5*q
What is the profit maximizing price in each case?
ROE Maximizing Price? (Automate if time or on your own)
ROE Maximizing Leverage?(Automate if time on your own)
What is "separable" in optimization?Can you pick price first?Leverage first?Why? This is actually pretty important and you should use your model until comfortable with the idea.
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