The Pear Computer Company just developed a totally revolutionary new personal co

Question

The Pear Computer Company just developed a totally revolutionary new personal computer. It estimates that it will take competitors at least two years to produce equivalent products. The demand function for the computer is estimated to be P = 2,500 - 0.0005Q The marginal (and average variable) cost of producing the computer is $900. a. Compute the profit-maximizing price and output levels assuming Pear acts as a monopolist for its product. b. Determine the total contribution to profits and fixed costs from the solution generated in Part (a).

Explanation / Answer

Q*P= Q*(2,500 - 0.0005Q.) TOTAL REVENUE=Q*(2,500 - 0.0005Q.) TOTAL COST=900 PROFIT=Q*(2,500 - 0.0005Q.)-900 DIFF IT N MAKE IT 0 TO GET Q

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