Create a spreadsheet describing Amazon's output and pricing choices with respect to the Kindle e-reader. (Use the template from Problem S1 with price equation: P = 294-35Q and MC = $126.) Use your spreadsheet optimizer to find the combination of output and price that maximizes profit. Now include the extra net revenue from e-book sales, $100 per Kindle. (Compute this total in cell G7 according to the formula: = 100*B7.) Finally, in cell H 7, compute total profit (from both Kindles and e-book sales). What combination of Kindle output and price maximizes Amazon' s total profit? Explain why Amazon should cut its price relative to the price in part a.

Create a spreadsheet describing Amazon's output and pricing choices with respect to the Kindle e-reader. (Use the template from Problem S1 with price equation: P = 294-35Q and MC = $126.) Use your spreadsheet optimizer to find the combination of output and price that maximizes profit. Now include the extra net revenue from e-book sales, $100 per Kindle. (Compute this total in cell G7 according to the formula: = 100*B7.) Finally, in cell H 7, compute total profit (from both Kindles and e-book sales). What combination of Kindle output and price maximizes Amazon' s total profit? Explain why Amazon should cut its price relative to the price in part a.

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter17: Capital And Time

Section: Chapter Questions

Problem 17.6P

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