The West Chester Corporation believes that the demand curve for its product is
P = 28 - 0.14Q
where P is price (in dollars) and Q is output (in thousands of units). The firm's board of directors, after a lengthy meeting, concludes that the firm should attempt, at least for a while, to increase its total revenue, even if this means lower profit.
a. Why might managers adopt such a policy?
b. What price should managers set if they want to maximize total revenue?
c. If the firm's marginal cost equals $14, do managers produce a larger or smaller output than they would to maximize profit? How much larger or smaller?