Question
A firm has developed a new product for which it has a registered trademark. The firm's market research department has estimated that the demand for
A firm has developed a new product for which it has a registered trademark. The firm's market research department has estimated that the demand for this product is Q(P,A)=11,600-1,000P+20A^(1/2)where Q is annual output, P is the price, and A the annual expenditure for advertising. The total cost of producing the new good is C(Q)=.001Q2+4Q. The unit cost of advertising is constant at m=1.
What is the optimal price P*?
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Managerial Economics Theory Applications and Cases
Authors: Bruce Allen, Keith Weigelt, Neil A. Doherty, Edwin Mansfield
8th edition
978-0393124491, 393124495, 978-0039391277, 393912779, 978-0393912777
