26 Jul WHAT ARE THE PROFIT-MAXIMIZING LEVELS OF PRICE AND OUTPUT FOR THE TWO FREIGHT CATEGORIES?
Chapter 14: Problems 3(b, c, d), 5(a, b, c), and 8(a, b, c)
3. American Export-Import Shipping Company operates a general cargo carrier service between New York and several Western European ports. It hauls two majorcategories of freight: manufactured items and semi manufactured raw materials.
b. . What are the profit-maximizing levels of price and output for the two freight categories?
c. At these levels of output, calculate the marginal revenue in each market.
5. Phillips Industries manufactures a certain product that can be sold directly to retail outlets or to the Superior Company for further processing and eventual sale asa completely different product. The demand function for each of these markets is
Retail Outlets: P1 = 60 – 2 Q1
Superior Company: P2 = 40 – Q2
whereP1 and P2 are the prices charged and Q1 and Q2 are the quantities sold inthe respective markets.
Phillips’ total cost function for the manufacture of thisproduct + 8(Q1 + Q2)5.
a. Determine Phillips’ total profit function.
b. What are the profit-maximizing price and output levels for the product inthe two markets?
c. At these levels of output, calculate the marginal revenue in each market.
8. The Pear Computer Company just developed a totally revolutionary new personal computer. It estimates that it will take competitors at least two years to produce equivalent products. The demand function for the computer is estimated to be ,500 – 0.0005Q
The marginal (and average variable) cost of producing the computer is $900.
a. Compute the profit-maximizing price and output levels assuming Pear acts as a monopolist for its product.
c. Calculate the contribution to profit and overhead for each of the 10 time periods and prices.
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