WEEK 6 CYU

A how much would wyandotte have to reduce the price

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a) How much would Wyandotte have to reduce the price of polyol to achieve a 15 percent increase in the quality sold? E D = %ΔQ D / %ΔP, –2.0 = +15% / %ΔP. To get 15% more sales, it can %ΔP = –7.5%. Using the arc price formula, we can get the new price and new quantity: –.075 = (P 2 – 15.00)/ [(P 2 + 15)/2] P 2 = \$13.92 ΔP = \$15 –\$13.92 = \$1.08 Also: .15 = (Q 2 – 30,000)/ [(Q 2 + 30,000)/2] Q 2 = 34,865 gallons b) Evaluate the impact of such a price cut on (i) total revenue, (ii) total costs, and (iii) total profit. i) Impact on Total Revenue: Before: TR, = 15(30,000) = \$450,000 After: TR 2 = 13.92(34,865) = \$485,321, so ΔTR = +\$35,321 ii) Impact on Total Cost: Before: FC 1 =\$90,000 After: FC 2 = \$90,000

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Myisha Coleman Week 6 CYU VC/unit = \$6.00 – .60 = \$5.40 VC 2 = \$5.40 × 34,865 = \$188,271 TC 2 = 90,000 + 188,271 = \$278,271, so ΔTC = +\$8,271 iii) Impact on Total Profits: Before: π, = \$450,000 – \$270,000 = \$180,000 After: π 2 = \$485,321 – \$278,271 = \$207,050, or Δπ = + 27,050 Check: ΔTR - ΔTC = Δπ: \$35,321 - \$8,271 = + 27,050.
Myisha Coleman Week 6 CYU Chapter 12 - Exercise 1, 2(b), and 5(b) 1. Assume that two companies (C and D) are duopolists that produce identical products. Demand for the products is given by the following linear demand function: P = 600 – QC – QD where Qc and QD are the quantities sold by the respective firms and P is the selling price. Total cost functions for the two companies are TCC = 25,000 + 100QC TCD = 20,000 + 125QD Assume that the firms act independently as in the Cournot model (ie., each firm assumes that the other firm’s output will not change). a) Determine the long-run equilibrium output and selling price for each firm. C = PQ C TC C = (600 Q C Q D )Q C (25,000 + 100Q C ) = 25,000 + 500Q C Q C 2 Q C Q D D = (600 Q C Q D ) QD (20,000 + 125Q D ) = 20,000 + 475Q D Q D 2 Q C Q D  C /Q C = 500 2Q C Q D and  D /Q D = 475 2Q D Q C

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