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22 July, 01:12

Consider a monopoly whose total cost function is tc = 10 + 5q + 2.5q2 and whose marginal cost function is mc = 5 + 5q. the demand function for the firms good is p = 115 - 0.25q. the firm optimizes by producing the level of output that maximizes profit or minimizes loss. if the firm uses a uniform pricing strategy, then the firm will

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  1. 22 July, 03:46
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    Uniform pricing offer the same charge to all clients. Assistances of this strategy contain the comfort of administration and the client goodwill created by such a rule. The main difficulty is that an inflexible uniform pricing policy can effortlessly be matched or weaken by opponents.

    But if the company will still use this kind of pricing strategy then it will produce 20 units of output, charge a price of $110, and earn a profit of $1090.

    P = 115 - 0.25 (20)

    = 110

    MC = 5 + 5q

    = 5 + 5 (20)

    = 105

    TC = 10 + 5q + 2.5q2

    = 10 + 5 (20) + 2.5 (20)

    = 160

    = 160 - 105

    = 55

    Profit = 55 X 20

    = 1200 - 110

    = 1090
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