Question

Q4. A firm has a demand curve P = 6600 - 100. Its total costs are TC = Q2. What are the optimal output, price and profits of the firm? Now assume that the firm is divided into two profit centres. One division manufactures the product at a total cost of TC = Q?, then transfers it to a selling division that faces the firm's demand curve. The selling division has no costs other than the transfer price and that the selling division can only buy internally. The selling division, however can select the quantity to purchase. What transfer price will the manufacturing unit select? What are the resulting profits for the two units? From the firm's standpoint, what is the optimal transfer price?

Answer 1

Given, Pl) b60-10 Kut pota f b P cip) 6s0n-10)- 6o20-20 11 FOC 220 9300 660D= PLQ)- 6600-3000 P3600 Teta paefit -360DX 300 990 0UD (300) NO h fim divided in to to Unue Moyuacewjing Unet pet Cil) Cel9 dmet t Coat mnu slling inet gp NovO where
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Cam Date 2)= ৫ - FOc 2 20 Novw Sine lel)o 6o0-1D-29 Fo 60-20-2 34.9 330 and P= 610D-33 OD 3300 Unit -108900 ftrafit of Selling Int 350X30-30 1089000-60 L088340 epiemal Hann ie R2X330 660