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Based on market research, a film production company in Ectenia obtains the following
Chapter 15, Problem Problems and Applications 15.12(choose chapter or problem)
Based on market research, a film production company in Ectenia obtains the following information about the demand and production costs of its new DVD: Demand: P = 1,000 10Q Total Revenue: TR = 1,000Q 10Q2 Marginal Revenue: MR = 1,000 20Q Marginal Cost: MC = 100 + 10Q where Q indicates the number of copies sold and P is the price in Ectenian dollars. a. Find the price and quantity that maximizes the companys profit. b. Find the price and quantity that would maximize social welfare. c. Calculate the deadweight loss from monopoly. d. Suppose, in addition to the costs above, the director of the film has to be paid. The company is considering four options: i. A flat fee of 2,000 Ectenian dollars ii. 50 percent of the profits iii. 150 Ectenian dollars per unit sold iv. 50 percent of the revenue For each option, calculate the profitmaximizing price and quantity. Which, if any, of these compensation schemes would alter the deadweight loss from monopoly? Explain
Questions & Answers
QUESTION:
Based on market research, a film production company in Ectenia obtains the following information about the demand and production costs of its new DVD: Demand: P = 1,000 10Q Total Revenue: TR = 1,000Q 10Q2 Marginal Revenue: MR = 1,000 20Q Marginal Cost: MC = 100 + 10Q where Q indicates the number of copies sold and P is the price in Ectenian dollars. a. Find the price and quantity that maximizes the companys profit. b. Find the price and quantity that would maximize social welfare. c. Calculate the deadweight loss from monopoly. d. Suppose, in addition to the costs above, the director of the film has to be paid. The company is considering four options: i. A flat fee of 2,000 Ectenian dollars ii. 50 percent of the profits iii. 150 Ectenian dollars per unit sold iv. 50 percent of the revenue For each option, calculate the profitmaximizing price and quantity. Which, if any, of these compensation schemes would alter the deadweight loss from monopoly? Explain
ANSWER:Step 1 of 4
a. The price and quantity of Ectenia’s company’s new DVD are 30 and $700 respectively as calculated below:
