Question

3. A U.S. textbook publisher is introducing a new economics textbook, Managerial Economics It is no Graphing matter, to the domestic market. Each book is produced at a constant marginal cost of S98 per book. Management predicts that annual domestic demand for the book is PD 278-0.30n, where Po price of a book in dollars, and Op denotes the number of hooks (as measured in thousands). a. Assuming no costs beyond the MC of $98 per book, state the profit equation for the domestic 1 point market: 1 point b. State the marginal profit equation for the domestic market: 2 points c. Determine the optimal quantity and price of the book in the domestic market: d. Using your answers to parts a and b, compute the total profit in the domestic market, I point assuming no fixed costs: No Name University has a successful football team, the Lethargic Leeches, and sells tickets to students, alumni, and the public. Experience has shown that attendance has followed the demand relationship: Q-28,000-2,000P 4. l point a. If No Name U charges $7 per ticket, predict attendance (o. Now, assume that the current capacity of the football stadium is 10,000 seats, what ticket price should be set for the stadium to be sold-out? l point

Answer 1

a) profit = pi = pQ - mCQ = (278 - 0.2 Q Q - 98 Q = 278 Q - 0.3 Q^2 - 98 Q = 180 Q - 0.3 Q^1 b) marginal profit = 2 pi/dQ = 180 - 0.6 Q c) For optimal quantity = d pi/d Q = 0 180 - 0.6 Q = 0 Q = 180/0.6 = 300 p = 278 - 0.3 (300) = 188 optimal quantity is 300 thousands & price is 188 d) Total profit = 188 (300000) - 98 (300000) = 27000000