04 Jun Question This same manufacturer of electronics products has just developed a handheld computer. Following is the cost schedule for produ
Question
This same manufacturer of electronics products has just developed a handheld computer. Following is the cost schedule for producing these computers on a monthly basis. Also included is a schedule of prices and quantities that the firm believes it will be able to sell. (Based on market research).
Chart below –
a. What price should the firm charge if it wants to maximize its profits in the short run?
b. What arguments can be made for charging a price higher than this price?
If a higher price is indeed established, what amount would you recommend? Explain.
c. What arguments can be made for charging a lower price than the profit-maximizing level? If a lower price is indeed established, what amount would you recommend? Explain.
Q(thousands) Price MR AVC AC MC
0 $1650 $0 $0 $0 $0
1 $1570 1570 1281 2281 1281
2 1490 1410 1134 1634 987
3 1410 1250 1009 1342.33 759
4 1330 1090 906 1156 597
5 1250 930 825 1025 501
6 1170 770 766 932.67 471
7 1090 610 729 871.86 507
8 1010 450 714 839 609
9 930 290 721 832.11 777
10 850 130 750 850 1011
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