Purchase Solution

firm's profit maximizing price and output

Not what you're looking for?

Ask Custom Question

You are the marketing manager of a firm that produces Titanium and sells this metal to two distinct kinds of customers: aircraft producers and golf club manufacturers. Demand for Titanium by these two market segments is quite different, as described by the respective price equations: PA = 10 - QA./600 and PG = 12 - QG./100, where annual quantities are in thousands of pounds and prices are in dollars. Your firm estimates the marginal cost of titanium production at $4 per pound.
a) For each segment, determine the firm's profit-maximizing price and output. Is the firm practicing price discrimination?
b) Because of Titanium shortages, the firm's total production capacity drops to only 1.5 million pounds per year. Determine the firm's optimal quantities and prices in this case.

Purchase this Solution
Solution Summary

A firm's maximizing price and output is examined. Titanium shortages in a firm's total production capacity is determined.

Solution Preview

a) For each segment, determine the firm's profit-maximizing price and output. Is the firm practicing price discrimination?

From the question,
PA = 10 - (QA/600) (1)
PG = 12 - (QG/100) (2)
QA = 600(10 - PA) (3)
QG = 100(12 - PG) (4)

Multiplying (1) by (3) and (2) by (4) to get total revenue we get:

TRA = 6,000 - 10QA - 6,000PA + PAQA
TRG = 14,400 - 12QG - 1,200PG + PGQG

Deducting the variable cost of $4 from each segment we get as profit:

ProfitA = (6,000 - 10QA - 6,000PA + PAQA) - 4QA
ProfitG = (14,400 - 12QG - 1,200PG + PGQG) - 4QG

Shortened:
ProfitA = 6,000 - 6QA - 6,000PA + PAQA
ProfitG = 14,400 - 8QG - 1,200PG + PGQG

Setting ...

Solution provided by:
Chidi Ngene, M. Sc.
Education
  • B. Sc., University of Nigeria
  • M. Sc., London South Bank University
Recent Feedback
  • "Thank you."
  • "thank you Chidi Ngene.. if you have any APA references would be great"
  • "Thank you so much for your help, your explanations were easy to understand and apply!"
  • "are you able to highlight the equations used either on the xlsx or a word doc as to how each graph was formed- overall looks fine i just need help understanding this myself"
  • "Chidi Ngene, M. Sc. Was extremely helpful as without the help and guidance I would have failed, but with the help I passed. I still have a lot to learn and in need of the guidance to understand and learn more on the subject. I would recommend Chidi Ngene and BrainMass to anyone that are in need of help. Thank you!!"
Purchase this Solution
Free BrainMass Quizzes
Economic Issues and Concepts

This quiz provides a review of the basic microeconomic concepts. Students can test their understanding of major economic issues.

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.

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.

View More Free Quizzes
Related BrainMass Solutions

  • Computation of Profit-Maximizing Price Level and Output

    345697 Computation of Profit-Maximizing Price Level and Output A firm uses a single plant with costs C = 160 + 16Q + .1Q2 and faces the price equation P = 96 - .4Q. a. Find the firm's profit-maximizing price and quantity. What is its profit?

  • cost & oligopolies

    Please step me through and explain the following questions ? How much are the firm's Fixed Costs? ? What is this firm's profit-maximizing output? ? What price does it charge in order to sell the profit-maximizing output?

  • Maximizing Profit: The Oligopolist Kinked Demand Curve Model

    How does this change in the firm's cost structure change its profit-maximizing output and price? What practical implications for the firm's customers does your answer have?

  • Find firm's profit-maximizing (or loss minimizing) output

    406961 Find firm's profit-maximizing (or loss minimizing) output Suppose that a perfectly competitive firm faces a market price (P) $5 per unit, and at this price the upward-sloping portion of the firm's marginal cost curve crosses its marginal revenue

  • Monopolist graph (supply and demand)

    At this point, price = C and output = Q1 The firm's total revenue = price X output = CQ1 Total cost = BQ1 Total profit = total revenue - total cost = CQ1 - BQ1 = (C - B)Q1 Total profit / unit = total profit / output = C-B Monopolist graph

  • firm's marginal revenue

    126924 Short-run Profit Maximization A perfectly competitive firm has the following fixed and variable costs in the short run. The market price for the firm's product is $150.

  • Could the firm increase its profit by using a second plant?

    This solution shows detailed calculations to answer a question in three parts: a) Given a firm's cost and price equations, find its profit-maximizing price and quantity.

  • Detailed Profit Maximization Calculation With Variations

    A calculation of a firm's profit-maximizing price and output, followed by mathematical analysis of other possible production strategies.

  • Computation of Profit Maximizing Price level and Output

    281050 Profit maximizing output level computation A firm uses a single plant with costs C = 160 + 16Q + .1Q2 and faces the price equation P = 96 - .4Q. Find the firms profit maximizing price and quantity. What is profit?

  • Economics: Demand curve analysis.

    How much are the firm's Fixed Costs? B. Assuming this firm's operates at its profit-maximizing output, what is that quantity of output? C. At its profit-maximizing output, what is the firm's profit or loss? D.

View More Related Solutions