Back from his dream, Matt begins some strategic planning for starting another store in a small...

Back from his dream, Matt begins some strategic planning for starting another store in a small town that has no computer store and is not inclined to use mail order buying methods.

He believes the annual demand in the town will be P = 1800 – 10Q. First, calculate Matt's marginal revenue curve, and then graph both the demand and MR curves.
He estimates his marginal cost per computer to be constant at $600. Sketch on the graph the marginal cost curve. From this data, calculate how much he should sell to maximize profit and what price Matt should charge.
If capital costs are fixed at $12,000 for the year what is Matt’s total cost function and his average cost per computer at the optimal output?
From the average cost at profit maximum output, show the profit rectangle on your graph above.
If Matt were able to perfectly price discriminate, what would be his output and profit?

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Expert Solution

Rahul Sunny answered 1 month ago

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