The Winston Tobacco Company feels that it is faced with the following segmented demand function for its cigarettes: where Q is the number of cartons sold and P is the price per carton.
(a)Why is such a segmented demand function likely to exist? What type of industry structure is indicated by this relationship?
(b)Determine Winston's marginal revenue function.
(c)Given that Winston's total cost function (including a "normal"return to the owners) is TC₁ = 80 + 2.6Q + .05Q² determine Winston's profit maximizing price and output level.
(d)Given that Winston's total cost function increases to TC₂ = 90 + 3.4Q + .05Q² what is their profit maximizing price and output level?

Question

The Winston Tobacco Company feels that it is faced with the following segmented demand function for its cigarettes:

where Q is the number of cartons sold and P is the price per carton.
(a)Why is such a segmented demand function likely to exist? What type of industry structure is indicated by this relationship?
(b)Determine Winston's marginal revenue function.
(c)Given that Winston's total cost function (including a "normal"return to the owners) is TC₁ = 80 + 2.6Q + .05Q² determine Winston's profit maximizing price and output level.
(d)Given that Winston's total cost function increases to TC₂ = 90 + 3.4Q + .05Q² what is their profit maximizing price and output level?

Quizplus · Accepted Answer

The Answer of The Winston Tobacco Company feels that it is faced with the following segmented demand function for its cigarettes: where Q is the number of cartons sold and P is the price per carton. (a)Why is such a segmented demand function likely to exist? What type of industry structure is indicated by this relationship? (b)Determine Winston's marginal revenue function. (c)Given that Winston's total cost function (including a "normal"return to the owners) is TC₁ = 80 + 2.6Q + .05Q² determine Winston's profit maximizing price and output level. (d)Given that Winston's total cost function increases to TC₂ = 90 + 3.4Q + .05Q² what is their profit maximizing price and output level?

The Winston Tobacco Company Feels That It Is Faced with the Following