Principles of Economics (12th Edition)
12th Edition
ISBN: 9780134078779
Author: Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher: PEARSON
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Chapter 13, Problem 3.1P
To determine
Total revenue, total cost, profit,
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Question 1: Video game industry. Suppose that there are only two companies in the video game industry who produce video game consoles: Xbox by Microsoft and Playstation by Sony. Microsoft’s cost function is T Cm = (qm)2, while Sony’s cost function is T Cs = 12qs. The market demand is Q = 940 − P ,where P is the market price and Q denotes the total quantity of the two companies combined.
(a) What is each company’s marginal cost?(b) Derive the reaction function of each duopolist.(c) How much will each company produce?(d) Illustrate your solution using a graph.(e) What will the market price be?(f) Find each company’s profit.
A firm faces the following average revenue (demand) curve: P = 100 - 0.01Q
where Q is weekly production and P is price, measured in cents per unit. The firm's cost function is given by C = 50Q +
30,000. Assuming the firm maximizes profits, the firm's level of production is
price in cents
is
and total profit per week in dollars is
(please put your
answer for price, quantity and profit in numerical values without any dollar sign, comma or decimal place).
If the government decides to levy a tax of 10 cents per unit on this product, the new level of production is
the price received by the monopolists after tax in cents is
and
total profit per week in dollars is
the price facing the consumer after the imposition of the
tax in cents is
(please put your answer for price, quantity and profit in numerical
values without any dollar sign, comma or decimal place).
Round off your final answer to whole #.
A company produces and sells a consumer product and is able
to control the demand by varying the selling price. The approximate relationship between price and demand is
p=45 + 2700/D - 5000/D2 for D > 1
The company is seeking to maximize its profit. The fixed cost is $1,000 and the variable cost is $38 per unit.
What is the number of units that should be produced and sold each month to maximize profit?
Chapter 13 Solutions
Principles of Economics (12th Edition)
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