Illustrate what price should the firm charge if it wants

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Reference no: EM1356134

This same manufacturer of electronics products has just developed a hand-held computer. Following is the cost schedule for producing these computers on a monthly basis. Also included is a schedule of prices and quantities that the firm believes it will be able to sell (based on previous market research).

Q(thousands) Price MR AVC AC MC
0 1,650
1 1,570 1,570 1,281 2,281 1,281
2 1,490 1,410 1,134 1,634 987
3 1,410 1,250 1,009 1,342.33 759
4 1,330 1,090 906 1,156 597
5 1,250 930 825 1,025 501
6 1,170 770 766 932.67 471
7 1,090 610 729 871.86 507
8 1,010 450 714 839 609
9 930 290 721 832.11 777
10 850 130 750 850 1,011

a. Illustrate what price should the firm charge if it wants to maximize its profits in the short run?

b. What arguments can be made for charging a price higher than this price? If a higher price is indeed established, what amount would you recommend? Explain.

c. What arguments can be made for charging a lower price than the profit-maximizing level? If a lower price is indeed established, what amount would you recommend? Explain.

Reference no: EM1356134

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