Question
War Game, Inc. produces games that simulate historical battles. The market is small but loyal, and War Game is the largest manufacturer. It is thinking
War Game, Inc. produces games that simulate historical battles. The market is small but loyal, and War Game is the largest manufacturer. It is thinking about introducing a new game in honor of the sixtieth anniversary of the end of World War II. Based on historical data regarding sales, War Game management forecasts demand for this game to be P = 50 - .002Q, where Q denotes unit sales per year, and P denotes price in dollars. The cost of manufacturing (based on royalty payments to the designer of the game, and the costs of printing and distributing) is C = 140,000 + 10Q.
(a) If the goal of War Game is to maximize profit, calculate the optimal output and price.
(b) If instead the company's goal is to maximize sales revenue, what is its optimal price and quantity?
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