The following is the demand data on the brewery you manage, Neo-Classical Keynes

Question

The following is the demand data on the brewery you manage, Neo-Classical Keynesian Imperial Brews.You have collected data on:

quantity – the number of pints your brewery pours monthly, price – the price you charge per pint,population – the surrounding population of the town your brewery is in (measured in thousands), wine price – the price of wine sold by Adam Smith’s Invisible Hand Winery, wine quantity – the number of bottles of wine poured at Adam Smith, regional income – an index of regional income (measured in units, higher index means higher income), pretzel price – the price of the pretzels that you sell, pretzel quantity – the number of pretzels that you sell, TV price – the price of 60-inch TV’s.

434.49

From our demand analysis, we estimated that:

Q = 853.68 - 74.56P

From our cost analysis, we found that our costs were:

C = 1500 + 0.01Q + 0.0001Q2

1. What price should we sell our beer for? How much do we expect to sell? What will our revenues and costs be? How much profit will we make?

2. What activities could we undertake that might increase our demand? How would we expect this to impact profit?

3. Describe a price discrimination scheme (either second- or third-degree). What sorts of prices would you charge? How would you prevent arbitrage? Would this scheme increase profit? Why? (more creative and correct answer will receive more points)

quantity price population Wine price wine quantity regional income Pretzel price Pretzel quantity TV price 582.39 5.52 65.000 5.88 325.39 100.00 6.47 419.82 419.82 647.71 4.62 65.423 5.05 353.85 100.20 4.53 483.11 483.11 630.73 4.55 65.670 6.34 311.90 100.33 6.17 460.68 460.68 530.46 5.44 65.627 4.36 366.31 100.35 7.94 410.21 410.21 591.69 5.38 65.836 4.45 376.58 100.22 6.75 438.68 438.68 571.22 4.55 66.174 5.09 358.37 100.12 5.98 456.03 456.03 592.02 4.94 66.344 5.09 346.20 100.51 6.51 437.19 437.19 594.98 5.43 66.691 5.33 353.71 100.35 5.64 455.07 455.07 647.15 4.10 67.207 4.89 355.77 100.70 6.41 436.45 436.45 545.97 5.17 67.164 3.82 370.89 101.03 7.22 414.50 414.5 611.25 4.26 66.485 5.06 339.31 100.75 6.74 427.98 427.98 627.39 3.86 66.306 5.35 337.27 101.04 6.69 418.57 418.57 650.20 3.38 66.715 3.65 400.13 101.05 6.10 454.61 454.61 581.59 4.37 66.523 4.55 371.08 101.21 8.82 389.18 389.18 600.35 4.65 66.666 4.71 374.34 101.31 5.79 458.25 458.25 602.40 4.60 67.138 4.97 358.17 101.48 8.35 390.42 390.42 556.38 6.24 67.231 5.61 325.13 101.45 7.61 408.74 408.74 569.91 4.83 67.397 4.34 376.20 101.32 5.12 476.67 476.67 552.82 5.40 67.620 3.50 393.80 101.67 9.68 367.18 367.18 596.04 4.98 67.802 5.19 343.57 101.68 7.65 420.94 420.94 579.05 5.13 67.901 5.05 344.08 101.98 7.66 421.70 421.7 607.55 4.33 67.766 4.06 377.28 102.01 7.29 425.85 425.85 547.34 4.76 68.190 4.72 365.04 102.14 8.36 377.16 377.16 550.19 5.67 68.015 4.77 372.58 102.23 7.50 421.82 421.82 594.48 4.58 68.024 4.27 384.29 102.30 6.10 451.82 451.82 612.38 5.28 67.606 6.10 317.15 102.49 7.21 405.93 405.93 601.80 6.16 67.363 6.66 298.60 102.71 6.24 431.57 431.57 597.78 4.80 67.315 3.54 400.41 102.65 8.11 398.63 398.63 614.90 5.03 67.445 6.20 325.11 102.77 6.57 428.84 428.84 656.44 3.97 67.827 5.53 346.74 102.83 7.09 434.49

434.49

Explanation / Answer

1.Equilibrium will be set at a point where MR=MC

Q=853.68-74.56P

P=853.68-Q/74.56

TR=P*Q

TR=(853.68-Q/74.56)*Q

TR=853.68Q-Q^2/74.56

MR=853.68-2Q/74.56

TC=1500+.01Q+.0001Q^2

MC=.1+.0002Q

At MR=MC

853.68-2Q/74.56=.1+.0002

853.68-2Q=7.5

2Q=853.68-7.5

1.Q=423.09

P=853.68-423.09/74.56

2.P=5.8

3.TR=853.68*423.09-(423.09)^2/74.56

TR=2443.3788

4.TC=1500+.01*423.09+.0001(423.09)^2

TC=1522.13141

5.Profits=TR-TC

Profits=921.2

Since,the first question had more than four sub parts I can answer only the first question.

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