Question
A firm faces a demand curve given by the equation P = 80 2Q. Its marginal cost of production is $20 per unit. a.
A firm faces a demand curve given by the equation P = 80 – 2Q. Its marginal cost of production is $20 per unit.
a. Find the profit-maximizing price and quantity.
b. Suppose that the firm contemplates issuing a $10-off coupon. Assume that consumers who would purchase at a price $50 or more never redeem coupons. Consumers who do not purchase at $50 or more always redeem coupons. By how much would the firm’s profits change if it issues this kind of coupon?
Step by Step Solution
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Step: 1
a To find the profitmaximizing price and quantity we need to determine the quantity at which margina...
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Microeconomics and Behavior
Authors: Robert Frank
9th edition
9780077723750, 78021693, 77723759, 978-0078021695
