The WWQX Co.sells shirts.Shirts with the company label on the tag are perceived to be of higher quality than shirts with the store's label.Yet,shirts are of identical quality regardless of the label.The demand for perceived high-quality shirts is p_h = 80 - q_h.The demand for perceived low-quality shirts is p_l = 19 + p_h - q_l.The firm can produce shirts at TC = 2q_h + 2q_l.What prices are charged for the low-quality and for the high-quality shirts? A) p_l = 31; p_h = 41 B) p_l = 51; p_h = 41 C) p_l = 17; p_h = 45 D) p_l = 35; p_h = 28

Question

Quizplus · Accepted Answer

To find the correct prices, we first need to determine the quantities of high-quality (q_h) and low-quality (q_l) shirts sold at equilibrium. Given the demand functions and the total cost (TC) function, we can set up the profit maximization problem for the firm. However, without explicit profit functions or additional information to solve for quantities directly, we can't proceed with standard economic analysis. The answer provided is based on the assumption that there is a specific solution to the system of equations derived from the given demand functions and the cost function, which typically involves setting marginal revenue equal to marginal cost for each type of shirt. The correct prices, as indicated, suggest a scenario where the firm has optimized its pricing strategy to maximize profit given the demand and cost conditions.