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# profit-maximizing price

Your marketing VP says that he believes that you could make more money by first releasing a 'limited edition' version aimed at hard-core video game players and then a few months later releasing a regular edition aimed at the general public.

He estimates the following inverse demand curves for each segment

Hard-core game players: PH = \$160 - 0.003QH
General public: PG= \$80 - 0.00033333QG

Your CFO estimates that the short-term cost function is the same as before:

STC(QH,QG)=\$1,100,000+22(QH+QG)

As is your MC functions for each market:

MC=\$22

A.Calculate the profit-maximizing price that you should charge and quantity you should sell to the hardcore game-players
B.Calculate the profit-maximizing price that you should charge and quantity you should sell to the general public
C.Calculate the revenues from selling to hard-core gamers and the revenue from selling to the general public
D.Calculate the profits that you will make from segmenting the market in this way

#### Solution Preview

A. Calculate the profit-maximizing price that you should charge and quantity you should sell to the hardcore game-players

Hard-core game players:
PH = \$160 - 0.003QH
Total Revenue=TRH=PH*QH=(160-0.003QH)*QH
TRH=160QH-0.003QH^2
Marginal Revenue=MRH=d(TRH)/d(QH)=160-0.006QH
For Profit maximization Put ...

#### Solution Summary

The profit-maximizing prices are assessed.

\$2.19