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The XYZ corporation, a monopolist, receives a report from a consulting firm concluding that the demand function for its product is: (45 points)




Q = 80 ? 1.5P + 2.3M + 0.75A;Where Q is the number of units sold, P the price of its product, M is buyers? per capita income, and A is the firm?s advertising expenditure. The firms? average cost function is;AVC = 42 ? 8Q + 1.5Q2;Consumer?s per capita income is estimated to be $10,000 and the firm spends $200,000 on advertising. The firm?s total fixed cost is equal to $50,000.;a. How much output should the firm produce to maximize profit (minimize loss)? Show all your work (steps and calculations);b. What price should be charged for the output? Show all your work.;c. What is the firm?s expected profit or loss?


Paper#15526 | Written in 18-Jul-2015

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