profit maximization price combination
Not what you're looking for?
A state owned company is providing electricity at the price of $0.105and faces the demand for electricity P=1.255-0.001Q. The company has a cost function C(Q)=100.625+0.105Q. The state sells the firm, now the firm's only goal is profit maximization.
a. What is the number of kilowatt hours of electricity produced and what is the price that the company will charge?
b. Compute the price elasticity at the profit maximizing price combination.
c. How much more profit will this firm make as a result of privatization.
Purchase this Solution
Solution Summary
Profit maximization for price combination are given. The number of kilowatt hours of electricity produced are given.
Solution Preview
first we consider the firm's marginal revenue and marginal cost
revenue = price X quantity = (1.255-0.001Q)Q = 1.255Q - 0.001Q^2. Marginal rev. = ...
Purchase this Solution
Free BrainMass Quizzes
Elementary Microeconomics
This quiz reviews the basic concept of supply and demand analysis.
Economic Issues and Concepts
This quiz provides a review of the basic microeconomic concepts. Students can test their understanding of major economic issues.
Basics of Economics
Quiz will help you to review some basics of microeconomics and macroeconomics which are often not understood.
Economics, Basic Concepts, Demand-Supply-Equilibrium
The quiz tests the basic concepts of demand, supply, and equilibrium in a free market.
Pricing Strategies
Discussion about various pricing techniques of profit-seeking firms.