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=1000-10Q
Total Revenue: TR=1000Q-10Q^2
Marginal Revenue: MR=1000-20Q
Marginal Cost: MC=100+10Q?

Where Q indicates the number or copies sold and P is the price in Ectenian dollars.

A. Find the price and quantity that maximizes the company's profit.
B. Find the price and quantity that would maximize social welfare.
C. Find out dead weight loss.

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

Question

21-11-2019
Business

contestada

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=1000-10Q
Total Revenue: TR=1000Q-10Q^2
Marginal Revenue: MR=1000-20Q
Marginal Cost: MC=100+10Q?

Where Q indicates the number or copies sold and P is the price in Ectenian dollars.

A. Find the price and quantity that maximizes the company's profit.
B. Find the price and quantity that would maximize social welfare.
C. Find out dead weight loss.

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

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cancinodavidq cancinodavidq · Answer 1 · 2019-11-22T20:13:48+01:00

cancinodavidq cancinodavidq

22-11-2019

Answer

The answer and procedures of the exercise are attached in a microsoft excel document.

Explanation

Please consider the data provided by the exercise. If you have any question please write me back. All the exercises are solved in a single sheet with the formulas indications.

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topeadeniran2 topeadeniran2 · Answer 2 · 2022-04-15T11:04:52+02:00

The price and quantity that maximizes the company's profit will be 30 and $700 respectively.

How to calculate the price?

The price and quantity that maximizes the company's profit will be calculated thus:

MR = MC

1000 - 20Q = 100 + 10Q

20Q + 10Q = 1000 - 100

30Q = 900

Q = 900/30

Q = 30

Price = 1000 - 10Q

= 1000 - 10(30)

= 1000 - 300

= 700

The price and quantity that would maximize social welfare will be:

MR = MC

1000 - 10Q = 100 + 10Q

10Q + 10Q = 1000 - 100

20Q = 900

Q = 900/20

Q = 45

Price = 1000 - 10Q

= 1000 - 10(45)

= 1000 - 450

= 550

The dead weight loss will be:

= 1/2(45 - 30)(700 - 400)

= 1/2 × 15 × 300

= 2250

In conclusion, the increase in total cost by $2000 won't have any change on the deadweight loss.

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