What is yuen’s profit function, Microeconomics

Assignment Help:

Yuen, a travelling salesman for snake oil, can produce the stuff at a marginal cost of 1. There are 100 potential customers in Vernon, each of whom has the following demand function for snake oil: P = 2 - y. The trouble is that none of the customers have any idea that Yuen is in town. The solution to his problem is, of course, advertising. The local radio station has explained to Yuen that their research shows that the probability that his message gets through to any one of the customers is [1 - 1/(1+A)], where A is the amount he spends on radio advertising.

a. What is Yuen's profit function?

Total demand:

Qd= y*100 = (2-P)*100=200-100P

P= (200-Qd)/100 = 2-.01Qd

revenues= Qd*P = [2 -.01Qd] *Qd

costs = TVC + ad costs = 1*Qd + A

b. What are the profit maximizing values of P and A?

 

 


Related Discussions:- What is yuen’s profit function

General, A tax imposed on a market with an inelastic demand and an elastic ...

A tax imposed on a market with an inelastic demand and an elastic supply will cause

COST FUNCTION, A firm has two plants. One plant produces according to a cos...

A firm has two plants. One plant produces according to a cost function cl (91) = Yf. The other plant produces according to a cost function c2(y2) = Yg. The factor prices are fixed

Continuity and regularity- export strategy , Continuity and Regularity: ...

Continuity and Regularity: We should make it a point that once we have entered the market for a particular commodity and have gained some foothold in it, we must strive to ma

PERFECT COMPETITION and THE SUPPLY CURVE & MONOPOLY, Chapter 13 / PERFECT C...

Chapter 13 / PERFECT COMPETITION and THE SUPPLY CURVE 1. Joe Brown’s dairy operates in a perfectly competitive marketplace. Joe’s machinery costs $500 per day and is the only fixe

The free enterprise: price system, The Free Enterprise:  Price System ...

The Free Enterprise:  Price System The free market system is where the decision about what is produced is the outcome of millions of separate individual decisions made by cons

Microeconomic international policy, Ask questi‘Social welfare functions emb...

Ask questi‘Social welfare functions embody a normative conception of the relative importance of equity and efficiency’. With the aid of diagrams, illustrate and explain this propos

Marginal product of a factor, Marginal Product (MP) of a Factor: From ...

Marginal Product (MP) of a Factor: From the above mentioned production function, immediately we can study the effect on total output when there is a variation in labour utlili

ENVIRONMENTAL POLLUTION , Environmental pollution may be eloborate as the c...

Environmental pollution may be eloborate as the contamination of the environment, with harmful wastes arising mainly from human activities. All these activities release certain m

Production Possibility Curve, How does production possibility curve help so...

How does production possibility curve help solve central problems?

Second best theory, what is the Theory of second best? Prove the theorem wi...

what is the Theory of second best? Prove the theorem with the help of digram

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd