Tracy is a marketing manager at humbert and humbert literary works. She has esti

Question

Tracy is a marketing manager at humbert and humbert literary works. She has estimated that the likely demand for a new novel is well represented by equations Qd=10,000- 400(p) +10,000 x D + A/10. Qd is the number of books sold. P is the price that humbert and humbert charges. D is the dummy variable taking a value of 1 if the author is famous and a value of 0 otherwise. A is the dollars spent marketing the book. Assume marginal cost is 10$. Suppose that H and H decide not to market a new title by a famous author. What should H and H charge?

Explanation / Answer

Qd= 10000-400p+A/10

here, 10000*D is dropped due to decision of H andH to to not market a new title by famous author

Now, revenue= qd*P

where p= (10000-qd+A/10)/400

Hence, revenue= 25Qd-Qd^2/400+ A*Qd/4000

Nw, marginal revenue= taking a first differentiation of revenue with respect to Qd

Hence, marginal revenue= 25- Qd/200+ A/4000

Now,H and H should sell quantity at point marginal revenue = marginal cost

Hence, 25-Qd/200+A/4000= 10

Qd/200 = 15+A/4000

Hence, Qd= 3000+ A/20

10000-400p+A/10 = 3000+A/20

400p= 7000+A/20

P= 17.5 + A/8000

This price H and H should charge

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