Suppose the manufacturer of running shoes has collected the following quantitative information. Demand for the boys’ shoe is estimated to be Q = 9,600 - 200P, or, equivalently, P = 48 - Q/200. The shoe’s direct cost is C = $60,000 +.0025Q2.
a. Check that these demand and cost equations are consistent with the data presented in the “Allocating Costs Revisited” section.
b. Find the firm’s profit-maximizing price and output.