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Determine the Profit-Maximizing Price
If a firm targets a 25 % rate of return on sales, and has unit costs of production of $100, what price should it charge if it uses cost-plus pricing? If the firm has a demand function P = 10000 – 20Q is the cost-plus price the profit-maximizing price? If not, determine the profit-maximizing price, quantity and corresponding profit. Is the target rate of return the profit-maximizing r.o.r.? why or why not? What important economic considerations, does cost-plus pricing ignore?
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Which of the following is evidence of market power? a. Output is fixed despite cost changes b. Optimal Output is less than industry output c. Output changes as cost changes
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Why might an oligopoly be reluctant to change its price? When some large firms have high total market share and are non-collusive, there is a strong element of interdependency.
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