Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

The Gourmet Coffee company sells packs of Nespresso coffee capsules in two adjacent states. The demand functions in these markets are: Market 1 (State A):

The Gourmet Coffee company sells packs of Nespresso coffee capsules in two adjacent states. The demand functions in these markets are: Market 1 (State A): Q1 = 210 - 3P1 Market 2 (State B): Q2 = 120 - 2P2 where P1 and P2 are the prices charged and Q1 and Q2 are the quantities sold in the two markets. The company produces all coffee capsules in one location according to the cost function: TC = 1/4Q^2 + 12Q + 150 where Q =Q1+ Q2, is the total output produced and sold. (Assume that quantities are expressed in units of thousands.) Assuming that the firm can effectively charge different prices in the two markets, calculate the profit maximizing prices and outputs in the two markets. Also, calculate optimal profit earned by the firm.

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

The Worldly Philosophers The Lives, Times And Ideas Of The Great Economic Thinkers

Authors: Robert L Heilbroner

7th Edition

068486214X, 9780684862149

More Books

Students also viewed these Economics questions