eco204_HW_14 - University of Toronto, Department of...

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University of Toronto, Department of Economics, ECO 204 2008 2009 S. Ajaz Hussain ECO 204 2008 2009 Ajaz Hussain HW 14 ______________________________________________________________________________ In lecture 16 , we discussed some “commerce” applications of the black box monopoly model. One of the applications was optimal (re) pricing under uncertainty where after producing the output the firm had to re optimize in light of new information. In this question, you’ll practice uncertainty for the black box model (where what a firm produces is sent to the market to be sold and MC is solely due to manufacturing costs). Question 1 (Based on ECO 204 2007 2008 Test 3 ) Sweet Ajax ‐‐ a Canadian company ‐‐ manufactures Halal maple syrup, sold in Canada and USA. Sweet Ajax’s marketing group estimates demand for each month of 2009 to be: P = 3,000 Q Where P is in Canadian dollars and Q is units of output. Sweet Ajax’s fixed costs are $250,000 per month and its marginal cost is $1,000. You’re in charge of planning output and price each
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eco204_HW_14 - University of Toronto, Department of...

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