Answered step by step
Verified Expert Solution
Link Copied!

Question

00
1 Approved Answer

Calculate the profit-maximizing price, total revenue, total royalty payments, firm profit, and deadweight loss. A percentage royalty plan, where the investor receives 20 percent of

Calculate the profit-maximizing price, total revenue, total royalty payments, firm profit, and deadweight loss.

A percentage royalty plan, where the investor receives 20 percent of the firm's revenue each period (0.20 x (160 x $480) = $15,360). Consider an investor interested in a firm whose inverse demand equals: P = 800 - 2Q. The firm's marginal cost of output is constant and equals $160 per-unit. The profit- maximizing firm produces 160 units in each period (MR = 800 - 4Q = 160; so Q = 160, and sets its price at $480 (800 - 2x160)). At this level of output, firm revenue equals $76,800 (160 x $480) and its profit equals $51,200 (($480 - $160) x 160).

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access with AI-Powered 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

Microeconomics An Intuitive Approach with Calculus

Authors: Thomas Nechyba

1st edition

538453257, 978-0538453257

Students also viewed these Economics questions