Q. The Zinger Company fabricates as well as sells a line of sewing machines. Demand per period (Q) for a scrupulous model is given by the following relationship:
Q = 400 - .5P where P stands for price. Total costs (including a "normal" return to the owners) of producing Q units per period are:
TC = 20,000 + 50Q + 3Q R3
a) Express total profits (π) in terms of Q.
b) At what level of output are total profit maximized? Illustrate what price will be charged? At this output level what are total profits?
a) What model of market pricing has been assumed in this problem? Validate your answer.