Letting p be the selling price per unit, v= $65 be the variable cost per unit...

 

Transcribed Image Text:

Letting p be the selling price per unit, v= $65 be the variable cost per unit and /= $400,000 be the fixed costs per year. The simple profit function we looked at is: quaf * pq-65g-400,000 (1.0.1) (1.0.2) Further assume the monopolist faces the same downward sloping demand curve from the lecture slides. That is, demand for their product declines with the price charged. Unlike the problem in the slides, here you have numerical values for a and b: p=a-bg p=175- 1 15,000 (1.0.3) (1.0.4) Part A (3 marks): Please plot price as a function of quantity. You can construct a set of points by letting quantity vary between 250,000 and 1,750,000. This is to help convince you that you've seen this sort of setting (at least graphically). Note: this is not a trick question and is meant to help in understanding how the problem looks. Part B (5 marks): Please determine the profit maximizing quantity sold and the associated selling price per unit. Show where this point lies on your figure from Part A. • Note: you should get actual numbers, e.g., q=2 million units and p = $500 each (note, these are not the correct values). Letting p be the selling price per unit, v= $65 be the variable cost per unit and /= $400,000 be the fixed costs per year. The simple profit function we looked at is: quaf * pq-65g-400,000 (1.0.1) (1.0.2) Further assume the monopolist faces the same downward sloping demand curve from the lecture slides. That is, demand for their product declines with the price charged. Unlike the problem in the slides, here you have numerical values for a and b: p=a-bg p=175- 1 15,000 (1.0.3) (1.0.4) Part A (3 marks): Please plot price as a function of quantity. You can construct a set of points by letting quantity vary between 250,000 and 1,750,000. This is to help convince you that you've seen this sort of setting (at least graphically). Note: this is not a trick question and is meant to help in understanding how the problem looks. Part B (5 marks): Please determine the profit maximizing quantity sold and the associated selling price per unit. Show where this point lies on your figure from Part A. • Note: you should get actual numbers, e.g., q=2 million units and p = $500 each (note, these are not the correct values).

Answer rating: 100% (QA)

To plot the price as a function of quantity well use the demand curve equation p 175 115000 q Lets v... View the full answer