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emeraldraven88Lv1

28 Sep 2019

A frim produces cars, Qc, and trucks, Qt, Its costs are given by C ( Qc,Qt)= 50Qc +60 Qt - 3QcQt/2

Clculate the measure of economies of scope for 20 cars and 10 trucks. Wht does this answe tell you about the production of cars and trucks?

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Kritika KrishnakumarLv10

28 Sep 2019

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Related questions

A mathematical demand function for new Toyotas sold per year for a dealer is as follows Qr = 200 - 0.001Pt + 0.005Pm - 10Pg + 0.01I +0.003A

where

Qt = quantity purchased,

Pt = the average price of Toyotas,

Pm = the average price of mazdas,

Pg = the price of gasoline,

I = per capita income, and

A = dollars spent annually on advertising

P_M = $20000 P_G = $1.00 I = $15000 A = $10000

1. Use the above to calculate the arc price elasticity of demand between P_T = $15000 and P_T = $10000

2. What will the estimated quantity sold and total revenue be at each of the above prices (fill in the table below)?

P_T	Q_T	Revenue
$15000
$10000

3. Marketing wants to lower P_T from $15000 to $10000. From a revenue viewpoint, explain why you agree or disagree with Marketing. Look at the elasticity calculated in #1 and the behavior of revenues in #2.

4. Calculate the point price elasticity of demand, given that P_T = $12500 and Q_T = 345. Compare the results with the answer to #1. If the results are the same, why does this make sense? If the results differ, why does this make sense? The formula is:

5. Calculate the point cross-price elasticity of demand between gasoline price (P_G) and Toyota demand. Assume the OPEC lowered petroleum production quotas and caused the price of gasoline to triple to P_G = $3.00. Calculate a new Q_T for P_G = $3.00 and P_T = $15000. Other variables and their values are given at the top, before question #1. Explain what this elasticity value implies for the responsiveness of the demand for Toyotas is relative to the price of gasoline?

burgundyoyster409

General Motors (GM) produces light trucks in several Michigan factories, where its annual fixed costs are

$180 million, and its marginal cost per truck is approximately $20,000. Regional demand for the trucks is

given by: P = 30,000 â 0.1Q, where P denotes price in dollars and Q denotes annual sales of trucks.

a. Find GMâs profitâmaximizing output level and price. Find the annual profit generated by light

trucks.

b. GM is getting ready to export trucks to several markets in South America. Based on several

marketing surveys, GM has found the elasticity of demand in these foreign markets to be Ed =â9

for a wide range of prices (between $20,000 and $30,000). The additional cost of shipping

(including paying some import fees) is about $800 per truck. One manager argues that the

foreign price should be set at $800 above the domestic price (in part a) to cover the

transportation cost. Do you agree that this is the optimal price for foreign sales? Justify your

answer.

c. GM also produces an economy (âno frillsâ) version of its light truck at a marginal cost of $12,000

per vehicle. However, at the price set by GM, $20,000 per truck, customer demand has been very

disappointing. GM has recently discontinued production of this model but still finds itself with an

inventory of 18,000 unsold trucks. The best estimate of demand for the remaining trucks is: P =

30000 â Q One manager recommends keeping the price at $20,000; another favors cutting the

price to sell the entire inventory. What price (one of these or some other price) should GM set

and how many trucks should it sell? Justify your answer.

Assume the cross-elasticity of demand for car tires with respect to the price of cars is -2. What does this tell you about the relationship between car tires and cars when the price of car rises by 10%?