Author Question: A firm in an oligopolistic industry has the following demand and total cost equations: P = 600 - ... (Read 81 times)

abern · **on:** Jul 1, 2018

A firm in an oligopolistic industry has the following demand and total cost equations:

P = 600 - 20Q and TC = 700 + 160Q + 15Q2

Calculate:
a. quantity at which profit is maximized
b. maximum profit
c. quantity at which revenue is maximized
d. maximum revenue
e. maximum quantity at which profit will be at least 580
f. maximum revenue at which profit will be at least 580

Question 2

Based on annual data from 2000-2010, the Gadget Company estimates that sales are growing according to a linear trend:

Q = 50,000 + 200t

where t is time and t = 0 in 2000.

a. Forecast sales for 2013.
b. Do you see any problems with this forecasting method?

b614102004 · **Reply #1 on:** Jul 1, 2018

Answer to Question 1

If revenue and cost schedules are calculated:
a. 6; b. 680; c. 15; d. 4500; e. 8; f. 3520

If results are calculated with equations:
a. 6.286; b. 682.86; c. 15; d. 4500; e. 8; f. 3520

Answer to Question 2

a. 52,600
b. The equation is based on data from 2000-2010. The further away from the final year, the less likely the equation is to be correct, as more factors may alter the trend seen in the data. A further issue is that the model is based on only 11 observed values.