Task: Your marketing VP says that he believes that you could make more money by first releasing a 'limited edition' version aimed at hard-core video game players and then a few months later releasing a regular edition aimed at the general public.
He estimates the following inverse demand curves for each segment
Hard-core game players: PH = $160 - 0.003QH
General public: PG= $80 - 0.00033333QG
Your CFO estimates that the short-term cost function is the same as before:
STC(QH,QG)=$1,100,000+22(QH+QG)
As is your MC functions for each market:
MC=$22
Q1. Calculate the profit-maximizing price that you should charge and quantity you should sell to the hardcore game-players
Q2. Calculate the profit-maximizing price that you should charge and quantity you should sell to the general public
Q3. Calculate the revenues from selling to hard-core gamers and the revenue from selling to the general public
Q4. Calculate the profits that you will make from segmenting the market in this way