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incentive for profit maximizing behavior

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Quality Uniform Total Marginal Variable
Sold Price Revenue Revenue Cost
0 $50.00 $0 $0 $28
1 $48.00 $48 $48 $28
2 $46.00 $92 $44 $28
3 $45.00 $135 $43 $28
4 $44.00 $176 $41 $28
5 $42.00 $210 $34 $28
6 $40.00 $240 $30 $28
7 $38.31 $268 $28 $28
8 $36.50 $292 $24 $28
9 $34.50 $311 $19 $28
10 $32.70 $327 $16 $28
11 $30.91 $340 $13 $28
12 $29.17 $350 $10 $28
13 $27.46 $357 $7 $28
14 $25.79 $361 $4 $28
15 $24.07 $361 $0 $28
16 $22.50 $360 ($1) $28
17 $20.94 $356 ($4) $28
18 $19.39 $349 ($7) $28

1. What price maximizes sales of revenue?

2. What price maximizes operating profit? And Why?

3. Who would pursue the first objective? (price max sale revenue)

4. How could Ralph Lauren's manager provides an incentive for profit maximizing behavior?

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Solution Summary

List some incentives for profit maximizing behavior in this case.

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Quality Sold Uniform Price Total Revenue Marginal Revenue Variable Cost Total Cost Operating Profit
0 $50.00 $0 $0 $28 $0 $0
1 $48.00 $48 $48 $28 $28 $20
2 $46.00 $92 $44 $28 $56 $36
3 $45.00 $135 $43 $28 $84 $51
4 $44.00 $176 $41 $28 $112 $64
5 $42.00 $210 $34 $28 $140 $70
6 $40.00 $240 $30 $28 $168 $72
7 $38.31 $268 $28 $28 $196 $72
8 $36.50 $292 $24 $28 $224 $68
9 $34.50 $311 $19 $28 $252 $59
10 $32.70 $327 $16 $28 $280 $47
11 $30.91 $340 $13 $28 $308 $32
12 $29.17 $350 $10 $28 $336 ...

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