Purchase Solution

Calculating output, price, total revenue and total profit

Not what you're looking for?

Ask Custom Question

Restaurant Marketing Services, Inc., offers affinity card marketing and monitoring systems to fine dining establishments nationwide. Fixed costs are $600,000 per year. Sponsoring restaurants are paid $60 for each card sold, and card printing and distribution costs are $3 per card. This means that RMS's marginal costs are $63 per card. Based on recent sales experience, the estimated demand curve and marginal revenue relations for are:

P=$130-$0.000125Q

MR=dTR/dQ =$130-$0.00025Q

A.Calculate output, price, total revenue and total profit at the revenue-maximizing activity level.
B.Calculate output, price, total revenue and total profit at the profit-maximizing activity level.
C.Compare and discuss your answers to parts A and B.

Purchase this Solution

Solution Summary

Solution describes the steps to calculate output, price, total revenue and total profit at both revenue maximizing and profit maximizing levels.

Solution Preview

A. Calculate output, price, total revenue and total profit at the revenue-maximizing activity level.

Revenue will be maximized when MR=0
130-0.00025Q=0
Q=130/0.00025=520000

P=130-0.000125Q=130-0.000125*520000=$65

Fixed Cost=$600,000
Variable Cost per unit=$63
Total Variable Cost=63Q
Total Cost=Fixed Cost+ Total Variable Cost=600000+63Q

Let us calculate ...

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.

Pricing Strategies

Discussion about various pricing techniques of profit-seeking firms.

Economic Issues and Concepts

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

Elementary Microeconomics

This quiz reviews the basic concept of supply and demand analysis.

Basics of Economics

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