Question

2. KopyKat is a firm that specializes in printing business cards using the latest laser technology. The manager has estimated that weekly demand can be approximated by P = 25 - .001Q, where P is price and Q is output per week. The firm’s cost function is C = 25, 000 + 13Q + .002Q2, where C is total cost.

(a) Determine the firm’s profit-maximizing price and output.

b) The night supervisor believes that extending KopyKat’s hours by two hours in the evening would substantially increase volume. The manager is willing to stay open for two hours over the next three months as an experiment. What results would lead the manager to decide if the store can remain open later in the evening on a permanent basis?

(c) A former employee decides to sue KopyKat, alleging employment discrimination. Although management claims innocence, they agree to settle out of court. The settlement requires KopyKat to pay the employee $10,000 per month for the next year. Determine the optimal price and output for the firm under these new conditions.

Answer 1