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12 Aztec Electronics possesses substantial market power in the market for advanced wireless stereo headphones. Using data available for the period 2005-2015, a linear farm
12 Aztec Electronics possesses substantial market power in the market for advanced wireless stereo headphones. Using data available for the period 2005-2015, a linear farm of the demand function was estimated. The resulting estimated demand function was Q = 41,000 - 500P + 0.6M - 22.5Pr, Where: output (Q) is measured in units of sales and average annual family income (M) and the two prices (P and Pr) we measured in dollars. Each estimated parameter has the expectes sign and is statistically significant at the 5 percent level. From an economic consulting fith, the manager obtained 2016 forecasts for income and the price of the complementary good (stereo tuners) as, respectively, $45,000 and $800. The firm has a total fixed cost of 270,000 with its estimated average variable cost function being AVC = 28 - 0.005Q + 0.000001Q2 A. Find an expression for the demand and Marginal Revenue equation. B.Determine the marginal cost equation for the firm. C. How many units of output should the firm produce to maximize its profit? D. Find the price the firm will charge in maximizing its profit. E.Should this firm shut down or it should continue to produce? F. What is the total of profit the firm by producing the profit maximizing level of output in in 2016
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