Purchase Solution

Demand function for Certified Product

Not what you're looking for?

Ask Custom Question

A product you produce has the following annual demand function:

P = 90 -0.003Q

The marginal cost of producing the product is $30. If the firm pays a fee of $50,000 to the General Drug Research Council, it can have its product's effectiveness certified. The demand function for a certified product is expected to be

P = 100 -0.003Q

a. Calculate the price, output, and profit contribution if the product is not certified.

b. Calculate the price, output, and profit contribution if the product is certified.

c. Should the firm undergo the certification process?

Purchase this Solution

Solution Summary

The price, output, and profit contribution are examined.

Solution Preview

a. Calculate the price, output, and profit contribution if the product is not certified.
Demand function is given by
P = 90 -0.003Q
Total Revenue=TR=P*Q
= (90-0.003Q)*Q
= 90Q-0.003Q^2
Marginal Revenue=MR=d(TR)/dQ=90-0.006Q
Marginal ...

Solution provided by:
Education
  • BEng (Hons) , Birla Institute of Technology and Science, India
  • MSc (Hons) , Birla Institute of Technology and Science, India
Recent Feedback
  • "Thank you"
  • "Really great step by step solution"
  • "I had tried another service before Brain Mass and they pale in comparison. This was perfect."
  • "Thanks Again! This is totally a great service!"
  • "Thank you so much for your help!"
Purchase this Solution


Free BrainMass Quizzes
Economics, Basic Concepts, Demand-Supply-Equilibrium

The quiz tests the basic concepts of demand, supply, and equilibrium in a free market.

Basics of Economics

Quiz will help you to review some basics of microeconomics and macroeconomics which are often not understood.

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.

Pricing Strategies

Discussion about various pricing techniques of profit-seeking firms.