Part D: The Company is also considering supplying the international textbook mar
ID: 1134198 • Letter: P
Question
Part D: The Company is also considering supplying the international textbook market, where marginal cost is assumed to be $130 per book due to higher shipping cost. Foreign demend is Pf (f is a subscript)=200-0.5Qf. State the total profit equation AND the Marginal Profit equation for the foreign market:
Au Homework assignment 1 FA18 Immanuel Osagie- 9 × File Insert Design Layout References Mailings Review View HelpTell me what you want to do Home d% Cut E Copy Find . epace Select Editing Times New Ro,112 A' A Aa- Paste Blu-abe , ' A-· , ITNommal TNO Spac Heading 1 Heading 2 Title Subtitle Subtle Em." Dictate ,-, Clipboard Font Paragraph Styles Voice Name: A U.S. textbook publisher is introducing a new economics textbook, Managerial Economics It is no Graphing matter. to the domestic market. Each book is produced at a constant marginal cost of S122 per book. Management predicts that annual domestic demand for the book is: PD 278-0.4QD, where Po-price of a book in dollars, and Qp denotes the number of books (in thousands). State the profit equation for the domestic market: 1 point a. b. Determine the optimal quantity and price of the book in the domestic market: 2 points Using your answers to parts a and b, compute the total profit in the domestic market, assuming no fixed costs c. 1 point Page 3 of4 604 words + 100% 7:03 AM O Type here to search 9/11/2018Explanation / Answer
(a) For domestic market,
Total revenue (TRd) = PD x QD = 278QD - 0.4QD2
Total cost (TCd) = Marginal cost x QD = 122QD
Total profit (TPd) = TRd - TCd = 278QD - 0.4QD2 - 122QD = 156QD - 0.4QD2
Marginal profit (MPd) = dTRd/dQD = 156 - 0.8QD
(b) Optimal choice is when MPd = 0.
156 - 0.8QD = 0
0.8QD = 156
QD = 195
PD = 278 - (0.4 x 195) = 278 - 78 = 200
(c) Total profit = (156 x 195) - (0.4 x 195 x 195) = 30,420 - 15,210 = 15,210
(d) For foreign market,
Total revenue (TRf) = Pf x Qf = 200Qf - 0.5Qf2
Total cost (TCf) = Marginal cost x Qf = 130Qf
Total profit (TPf) = TRf - TCf = 200Qf - 0.5Qf2 - 130Qf = 70Qf - 0.5Qf2
Marginal profit (MPf) = dTRf/dQf = 70 - Qf
NOTE: As per Chegg Answering Policy, first 4 parts have been answered.
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