Operating system for smartphones

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Reference no: EM132132826

A company has two divisions.  The first produces an operating system for smartphones. The other division manufacturers and markets its own smartphone. Of course, the company's smartphone runs on its own operating system. Marginal cost of a chip in the operating-system division is $65, while marginal cost in the smartphone division--excluding the cost of the chip--is a constant $28 (thus, in this problem, AVC = MC). In addition, the price elasticity of demand for this company's smartphone is a constant -1.12 at every price level, with demand for the smartphone given by the function: Q = 58,000P-1.12., where P is the price per smartphone, and Q is the quantity of smartphones demanded, in millions. 

For this entire problem, assume pricing is conducted over the long run (AC = AVC:  all costs are variable).

Reference no: EM132132826

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