Question

Read the Chapter 3 Case Exercises: "Polo Golf Shirt Pricing". Where is the profit maximizing level of output? Based on your understanding of marginal analysis, explain why you made this choice n the context of why it could not possibly be at any other output level.

Polo Golf Shirt Pricing

The setting is a Ralph Lauren outlet store, and the product line is Polo golf shirts. A product manager and the General Manager for Outlet Sales are analyzing the discounted price to be offered at the outlet stores. Let’s work through the decision at the level of one color of golf shirts sold per outlet store per day. The decision being made is how low a price to select at the start of any given day to generate sales at that price throughout the day. The demand, revenue, and variable cost information is collected on the following spreadsheet:

QUANTITY SOLD	UNIFORM PRICE ($)	TOTAL REVENUE ($)	MARGINAL REVENUE ($)	VARIABLE COST ($)
0	50.00	0	0	28
1	48.00	48	48	28
2	46.00	92	44	28
3	45.00	135	43	28
4	44.00	176	41	28
5	42.00	210	34	28
6	40.00	240	30	28
7	38.31	268	28	28
8	36.50	292	24	28
9	34.50	311	19	28
10	—	—	16	28
11	—	—	13	28
12	—	—	10	28
13	—	—	7	28
14	—	—	4	28
15	—	—	0	28
16	—	—	(1)	28
17	—	—	(4)	28
18	—	—	(7)

Answer 1

२४ Ane I As we can see from the table, Vantable cont is constant which implies that total lost will be constant as well because total lost is the sum of Variable cost and fined lost. It Total lost is constant then it.. implies that marginal Cost will be zero. o P TR to MRT Vc. 05000 २४ ५४ ५8 ५8 २९ २ ५६ १२५५२४ Lutu5. ..1354 ? ५५५1764 २४ 5 ५२ २०५ २४ 6. ५० २५० 30 २४ . 7 -28-31 268 २४ २8 8 1.76.50. २१२. २५ २४ १ ५ .5ORA ।। ११ २४ 10 327 .07 16 . २४ 30.4 340 ? २१.6 350 10 27.16 250 7 28 25.78 36। ५ 28 15 २५.66 36 . २६ २२. 5 360 - २ 17 २०.१५ 5 6 -५ २ . 18 19.38 3 ५१ -7 २8 The firm will choose that price where MREMC and IMC is zero at all level of output. So, firm will Change P = 24.06 where MR=me=0.