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

question 2

Essay

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?

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Definitions:

Hardy-Weinberg Equilibrium

A principle stating that the genetic variation in a population will remain constant from one generation to the next in the absence of disturbing factors.

Allele Frequencies

The relative frequencies of different alleles of a particular gene in a given population.

Genotype Frequencies

The distribution of the different genetic constitutions within a population.

Fixing Beneficial Allele

The process by which a favorable genetic variant becomes present in all individuals within a population due to natural selection.