KopyKat Is a Firm That Specializes in Printing Business Cards

question 44

Essay

KopyKat is a firm that specializes in printing business cards and résumé's, using the latest laser technology. The manager has estimated that weekly demand can be approximated by P = 25 - .001Q, where P is price and Q is output per week. The firm's cost function is C = 25,000 + 13Q + .002Q², where C is total cost.
(a) Determine the firm's profit maximizing price and output.
(b) The night supervisor believes that extending KopyKat’s hours by two hours in the evening would substantially increase volume. The manager is willing to stay open for two hours over the next three months as an experiment. What results would lead the manager todecide if the store can remain open later in the evening on a permanent basis?
(c) A former employee decides to sue KopyKat, alleging employment discrimination. Although management claims innocence, they agree to settle out of court. The settlementrequires KopyKat to pay the employee $10,000 per month for the next year. Determine the optimal price and output for the firm under these new conditions.

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Definitions:

Fair Bet

A gamble or bet in which the expected value of the winnings equals the cost of playing, indicating no advantage for the bettor or the house.

Risk-neutral

A situation or attitude wherein an individual or entity is indifferent to risk when making investment decisions.

Expected Utility

A concept in economics and game theory that predicts the utility an individual can expect when faced with uncertain outcomes.

Peach

A type of fruit known for its fuzzy skin, sweet flesh, and a pit in the center.