Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

1. Imagine that you are advising a small new car dealership. They ask: A) given the information below, what is the best price they should

1. Imagine that you are advising a small new car dealership. They ask:

A) given the information below, what is the best price they should put on all the cars, assuming every buyer pays the same price and how much profit will they make?

B) is there a better way to make profits and how much profit could they make? why might this strategy be difficult to use? The firm can't change their costs. But they could use a different pricing scheme, not charging every customer the same price.

Fixed cost for business is $3000

Variable cost is $20,000 for each car they get from the manufacturer.

They anticipate the following customers.

Ms. Rich would pay up to $30,000

Mr. Upper Middle would pay up to $26,000

Ms. Middle would pay up to $22,000

Mr. Lower Middle would pay up to $18,000

Ms. Poor would pay up to $14,000

2. Help me understand how make complete table for Q, Price, TC, MC, TR, MR and profits.

Start the price 13 for Q = 1, and then reduce the price as Q increases. (You are price-making monopoly)

For costs, begin with TC = 5 at Q = 1, then you may use any numbers you like for costs. You may need to play around with the numbers to make this work out. Make certain that your MC and TC match each other.

Show that MR = MC at profit maximization. Note: it may be in between two levels of output.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Economics For Environmental Studies A Strategic Guide To Micro-And Macroeconomics

Authors: Alfred Endres, Volker Radke

2012th Edition

364231192X, 978-3642311925

More Books

Students also viewed these Economics questions

Question

In Exercises, use limits to compute f(x). T + x X = (x)

Answered: 1 week ago

Question

5. Give some examples of hidden knowledge.

Answered: 1 week ago