A.
To calculate: The total profit function of the firm.
A.
Answer to Problem 3E
The detailed solution with explanation is provided in the next section.
Explanation of Solution
The demand function for two classes of goods is given as;
Total Revenue for the manufactured item is,
Total Revenue for semi-manufactured item is,
Total Cost function is,
Total Profit function is,
Introduction: A mathematical relationship between the total profit and output of a firm is called profit function.
B.
To calculate: The profit maximizing level of price and output for each of the two freight categories.
B.
Answer to Problem 3E
The detailed solution with explanation is given in the next section.
Explanation of Solution
First, differentiate the total profit function with respect to the Q1
Now, we shall differentiate the total profit function with respect to the Q2
Introduction: A mathematical relationship between the total profit and output of a firm is called profit function.
C.
To calculate: The marginal revenue for each market at the given levels of output.
C.
Answer to Problem 3E
The detailed solution with explanation is given in the next section.
Explanation of Solution
Marginal Revenue in each market
Now, we shall substitute the values of output
First, we shall differentiate the total profit function with respect to the Q1
Marginal Cost for manufactured goods is $4
Now, we shall substitute the values of output
Thus, the marginal cost for semi-manufactured goods is $4
Introduction: A mathematical relationship between the total profit and output of a firm is called profit function.
D.
To Calculate: The marginal revenue for each market at the given levels of output.
D.
Answer to Problem 3E
The detailed solution with explanation is given in the next section.
Explanation of Solution
Marginal Revenue in each market
Now, we shall substitute the values of output
First, we shall differentiate the total profit function with respect to the Q1
Marginal Cost for manufactured goods is $4
Now, we shall substitute the values of output
Thus, the marginal cost for semi-manufactured goods is $4
Introduction: A mathematical relationship between the total profit and output of a firm is called profit function.
E
To calculate: The profits.
E
Answer to Problem 3E
The detailed solution with explanation is provided in the next section.
Explanation of Solution
Total Profit function is
Introduction: A mathematical relationship between the total profit and output of a firm is called profit function.
F
To calculate: The difference in profit levels between differential pricing and uniform pricing cases.
F
Answer to Problem 3E
The detailed solution with explanation is provided in the next section.
Explanation of Solution
Now, differentiate with respect to the price
Elasticity of demand manufactured good (E2)
Now, differentiate with respect to the price.
Introduction: A mathematical relationship between the total profit and output of a firm is called profit function.
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Chapter 14 Solutions
Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
- Road Runner Co is a Pakistani manufacturer making Bicycles. It exports to two markets,Bangladesh and Sri Lanka. Demand for Bicycles in thesetwo markets is given by the following Functions: Bangladesh Q1 = 12 – P1Sri Lanka Q2 = 8 – P2 Where Q1 and Q2 are respective quantities sold (in thousands) andP1 and P2 are the respective prices (in Pak. Rupees per unit) in the two markets. Total cost function is C = 5 + 2 (Q1+ Q2) Required. Determine the company’s total profit function. Also, (i) What are the profit maximizing levels of price and output for the two markets? (ii) Calculate the marginal revenues in each market.? 2. Now consider two cases: (i) Company is effectively able to price discriminate in the two markets. What will be the total profits? (ii) Suppose the company does not engage in price discrimination. By charging thesameprice in the two markets what are the profit…arrow_forwardA U.S. export-import shipping company operates a general cargo carrier service between New York and several western European ports. It hauls two major categories of freight: manufactured items (Q₁) and semimanufactured raw materials (Q₂). The demand functions for these two classes of goods are: P₁ = 200 - Q₁ where Qi = tons of freight moved. The total cost function for the United States is TC=20+4(Q1 + Q2) What is the firm's total profit function? 200Q1-Q₁² +80Q2 − Q2² - 20 ○ 196Q1 − Q₁² + 76Q2 − Q2² 2 P₂ = 80 - Q2 199Q1-Q₁² +60Q2 - Q₂² - 20 O 196Q1-Q₁² + 76Q2 - Q₂² - 20 The profit-maximizing levels of price and output for manufactured items are $ The profit-maximizing levels of price and output for semimanufactured raw materials are $ At these levels of output the marginal revenue in the manufactured items market is $ raw materials market is $ per ton and At these prices, the price elasticity of demand in the manufactured items market is semimanufactured raw materials market is (Hint:…arrow_forwardRoad Runner Co is a Pakistani manufacturer making Bicycles. It exports to two markets,Bangladesh and Sri Lanka. Demand for Bicycles in thesetwo markets is given by the following Functions: Bangladesh Q1 = 12 – P1 Sri Lanka Q2 = 8 – P2 Where Q1 and Q2 are respective quantities sold (in thousands) andP1 and P2 are the respective prices (in Pak. Rupees per unit) in the two markets. Total cost function is C = 5 + 2 (Q1+ Q2) b. consider two cases: (i) Company is effectively able to price discriminate in thetwo markets. What will be the total profits? (ii) Suppose the company does not engage in price discrimination. By charging thesameprice in the two markets what are the profit maximizing levels of price,output, and the total profits? c. Analyze, with graphs, the two alternative pricing strategies available to the company.arrow_forward
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- Managerial Economics: Applications, Strategies an...EconomicsISBN:9781305506381Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. HarrisPublisher:Cengage Learning