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Unformatted text preview: Future demand for your product is random. Demand will be HIGH, Q = 1,000 – 2P, with probability p HIGH = 0.4. Demand will be MEDIUM, Q = 500 – P, with probability p MEDIUM = 0.4. Demand will be LOW, Q = 250  ½ P, with probability p LOW = 0.2. You must commit to a production decision today, before you know what demand turns out to be. Your future price and profits are random variables. Your cost of production C(Q) = 15,000 + 250Q. You manage a profit maximizing firm. You will produce ________units of output. Your expected profit will equal _________ and the standard deviation of your profits (a measure of risk confronting shareholders) will equal _____________....
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This note was uploaded on 02/06/2011 for the course ECON 415 taught by Professor Holland during the Summer '09 term at Purdue.
 Summer '09
 HOLLAND
 Economics, Price Discrimination

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