Question

You are the product manager for wireless headphones and your company has the exclusive license of the product. The company's marketing department models the demand function for your game as Q = a + bP + cM + dPS, where Q is the annual demand for your product measured in thousands of units, P is the price of the headphones, M is the average annual family income measured in thousands of dollars, and PS is the price of the stereos with the technical specifications needed to have an excellent listening experience. The output given by Excel after running a regression is the following:

DEPENDENT VARIABLE:	Q	R-SQUARE
OBSERVATIONS:	32	0.8270
VARIABLE		COEFFICIENT	STANDARD ERROR	T-RATIO	P-VALUE
INTERCEPT		39.1	10.6540	3.67	0.0019
P		̶ 0.05	0.0290	-3.45	0.0031
M		0.06	0.01439	4.17	0.0006
PS		̶ 0.0225	0.008242	-2.73	0.0144

(10 pts.) Assume the price of stereos goes back to $800. How low would income have to be for the firm to exit the market in the long run? In other words, what is the lowest income at which the firm can avoid negative profit?

Answer 1

ANSWER- fa wPonelem headphonen & managen Company han he Product The your exccuAPve License of tue product The Company's manketing depantment modela the function for your game ani demand Q= a+bP +CM+dPS Where, Q - Annual demand fod your prodket meanured on tuourando of unita P- prece ot tue headphonea. M- Average annoal fam?ly income meanured n thounanda ot douarn. Ps- price of kue steneon with kie technicat Speoficationa needed to have an excellent DEPENDENT R-SQUARE VARIABLE: OBSERVATIONS: 32 0.8270 STANDARD ERRROR P-VALUE VARIABLE COEFFICIENT T-RATIO INTERCEPT 2.9972 3.67 0.0019 11 -0.1 0.0290 -3.45 0.0031 0.0006 0.6 0.1439 4.17 -0.0225 PS 0.008242 -2.73 0.0144 det, back to $800. Income of steneos THe prece goea faur, kue firm ufu ewetdocon f St ufu be unable fined cont P.e; porce changed to Coves even 9tA betow tue mmium profit of Ave orve .