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gizmo_the_mogwai [7]
3 years ago
6

Suppose you are the marketing manager for Fruit of the Loom. An individual's inverse demand for Fruit of the Loom women's underw

ear is estimated to be P = 25 − 3Q (in cents). If the cost to Fruit of the Loom to produce an item of women's underwear is C(Q) = 1 + 4Q (in cents), compute the profit Fruit of the Loom will earn by charging the optimal block price.
Business
1 answer:
anzhelika [568]3 years ago
7 0

Answer:  Profit of charging the optimal block price is 73.5 cent or $0.74.

Explanation:

Given that,

The inverse demand function: P = 25 − 3Q (in cents)

Cost of producing = C(Q) = 1 + 4Q (in cents)

By charging the optimal block price, the firm produce at a point where

Price = Marginal Cost (MC)

MC = 4

Therefore,

25 − 3Q = 4

Q = 7

Consumer Surplus = Profit of charging the optimal block price=0.5 × (y-intercept of the demand curve -MC) × Q

= 0.5(25 - 4) × 7

= 73.5 cent

It is equivalent to $0.74.

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Answer:

A) They would be indifferent, as Sally's income net of costs equals $25,000.

Explanation:

Sally's economic profit = accounting profit - opportunity costs

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Uh is edge supposed to have blank sections? Proof is below!
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