do fast 5. (4 points) Answer:120 Costs10000 AA-F80تم تعدMCATCAVCECAFC = "TFC = "P => 50Aren

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Answered: 5. (4 points) Answer: 120 Costs 10000 A…

Marketing

20th Edition

ISBN:9780357033791

Author:Pride, William M

Publisher:Pride, William M

Chapter20: Setting Prices

Section: Chapter Questions

Problem 1SC

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Pricing Decisions at Madison The Madison Company manufactures and retails a certain product. The company wants to determine the price that maximizes its profit from this product. The unit cost of producing and marketing the product is 50. Madison will certainly charge at least 50 for the product to ensure that it makes some profit. However, there is a very competitive market for this product, so that Madisons demand falls sharply when it increases its price. How should the company proceed?2 In the pricing model in Example 7.1 with the constant elasticity demand function, the assumption is that all units demanded are sold. Suppose the company has the capacity to produce only 200 units. If demand is less than capacity, all of demand is sold. If demand is greater than or equal to capacity, only 200 units are sold. Use Solver to find the optimal price and the corresponding profit. Then use SolverTable to see how sensitive these answers are to the production capacity, letting it vary from 170 to 230 in increments of 10. Discuss your findings relative to the original solution in Example 7.1. In other words, what is the effect of capacity on the optimal price and profit?

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5. (4 points) Answer: 120 Costs 10000 A A- F 80 تم تعد MC ATC AVC E C AFC = " TFC = " P => 50 Aren