Home » Suppose a firm faces the following demand for their product: P=100-Q. Further assume that the marginal cost to produce the product is \$10 and that…

# Suppose a firm faces the following demand for their product: P=100-Q. Further assume that the marginal cost to produce the product is \$10 and that…

Suppose a firm faces the following demand for their product: P=100-Q. Further assume that the marginal cost to produce the product is \$10 and that the fixed costs are \$15. The firm is thinking of implementing the following pricing technique: sell as much as it can at a price of \$40 then decrease the price to \$25 and sell as much as it can. How many units in total is it going to sell under this scheme? Answer selection: (15,135,75,100,60)How much profit is the firm going to make under this scheme? Answer selection: (\$1975,2010,1860,1875, 2025)

P = 100 – QWhenP = 40Q = 60Therefore at \$40, the firm sells 60 unitsWhen P falls to \$25P = 25Q = 75Therefore at \$25, the firm sells (75 – 60) = 15 unitsProfit = (40×60) + (25×15) –…

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