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Unformatted text preview: maximizing quantity to produce
where price equals the marginal cost of production for chairs is: MCC = PC 25 + 2QC = 90 2QC = 65 QC = 32.5.
Profit when producing only chairs is: π = PCQC – (25QC + (QC)2 ) π = 90(32.5) – (25(32.5) + (32.5)2 ) π = 2,925 – 812.5 – 1,056.25 π = $1,056.25.
Profit when producing neither benches nor chairs is zero: π = 0.
Comparing profit when producing both benches and chairs, when producing only benches, when producing
only chairs, and when producing neither benches nor chairs, Noah and Naomi should produce 50 benches
and 0 chairs. 10. awar d: 5 out of
On Friday, April 2, 1993, executives at Phillip Morris made a bold move, announcing a reduction of
approximately 20 percent in the price of Marlboros. The retail price dropped from $2.20 to $1.80 a pack. The
announcement sent shock waves through the cigarette industry. The reaction in the stock market was swift and
punishing: Phillip Morris’s stock price dropped 23 percent in a single day, erasing $13.4 billion in stockholder
value. That day was immediately dubbed “Marlboro Friday.” How much would Marlboro sales have had to
increase in response to a price reduction to $1.70 for that price reduction to increase profit? Assume packs of
Marlboros each cost $1.00 to produce.
Instructions: Round your answer to nearest whole number.
Sales need to increase by more than 71. 4 percent. rev is ed jrl 08112011 Worksheet Section: Marginal Revenue,
Marginal Cost, and Profit
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This note was uploaded on 01/22/2014 for the course ECO 3352 taught by Professor Ax during the Fall '13 term at Troy.
- Fall '13