Reference no: EM131194522
Suppose that you have estimated the following demand function for your firm.
Qd = 150,000 - 400P + 6M - 200Pr
where Qd is the amount sold, P is price, M is income, and Pr is the price of a related good. The estimated values for M and Pr in 2014 are $25,000 and $200, respectively. The AVC (Average Variable Cost) function has been estimated to be :
AVC = 300 - .012Q + .000003Q^2
Fixed forecast for 2016 : $400,000
What is the profit-maximizing level of production?
What is the profit-maximizing price at this output?
What is the own price elasticity of demand at this level of output? Is demand elastic or inelastic at this price and quantity?
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