The same manufacturer of electronics products has just developed a handheld computer. Following is the cost schedule for producing these computers on a monthly basis. Also included is a schedule of prices and quantities that the firm believes it will be able to sell (based on previous market research).
Q (Thousands) Price MR AVC AC MC
0 1650 1570 1281 2281 1281
2 1490 1410 1134 1634 987
3 1410 1250 1009 1342.33 759
4 1330 1090 906 1156 597
5 1250 930 825 1025 501
6 1170 770 766 932.67 471
7 1090 610 729 871.86 507
8 1010 450 714 839 609
9 930 290 721 832.11 777
10 850 130 750 850 1,011
a. What price should the firm charge if it wants to maximize its profits in the short run?
b. What arguments can be made for charging a price higher that this price? If a higher price is indeed established, what amount would you recommend? Explain.
c. What arguments can be made for charging a lower price than the profit-maximizing level? If a lower price is indeed established, what amount would you recommend? Explain.
The same manufacturer of electronics products has just developed a handheld computer. Following is the cost schedule for producing these computers on a monthly basis. Also included is a schedule of prices and quantities that the firm believes it will be able to sell (based on previous market research).
Q (Thousands) Price MR AVC AC MC
0 1650 1570 1281 2281 1281
2 1490 1410 1134 1634 987
3 1410 1250 1009 1342.33 759
4 1330 1090 906 1156 597
5 1250 930 825 1025 501
6 1170 770 766 932.67 471
7 1090 610 729 871.86 507
8 1010 450 714 839 609
9 930 290 721 832.11 777
10 850 130 750 850 1,011
a. What price should the firm charge if it wants to maximize its profits in the short run?
b. What arguments can be made for charging a price higher that this price? If a higher price is indeed established, what amount would you recommend? Explain.
c. What arguments can be made for charging a lower price than the profit-maximizing level? If a lower price is indeed established, what amount would you recommend? Explain.
