Keiser ECO 581 - The demand and cost function
Question # 00432337
Posted By:
Updated on: 11/29/2016 02:57 AM Due on: 11/29/2016
Eco 581
The demand and cost function for a company are estimated to be as follows:
P = 100 – 8Q
TC = 50 + 80Q – 10Q^2 + 0.6Q^3
a. What price should the firm charge if it wants to maximize its profit in the short run?
b. What price should it charge if it wants to maximize its revenue in the short run?
c. Suppose the company lacks confidence in the accuracy of cost estimates expressed in a cubic
equation, and simply wants to use a linear approximation. Suggest a linear representation of this
cubic equation. What difference would it make on the recommended profit-maximizing and
revenue-maximizing prices?
The demand and cost function for a company are estimated to be as follows:
P = 100 – 8Q
TC = 50 + 80Q – 10Q^2 + 0.6Q^3
a. What price should the firm charge if it wants to maximize its profit in the short run?
b. What price should it charge if it wants to maximize its revenue in the short run?
c. Suppose the company lacks confidence in the accuracy of cost estimates expressed in a cubic
equation, and simply wants to use a linear approximation. Suggest a linear representation of this
cubic equation. What difference would it make on the recommended profit-maximizing and
revenue-maximizing prices?
-
Rating:
/5
Solution: Keiser ECO 581 - The demand and cost function