Problem
The following data represents a firm serving a specific transportation market.
|
Total Output
|
Total Revenue
|
Total Cost
|
|
0
|
$0
|
$1,000
|
|
1
|
$1,700
|
$2,000
|
|
2
|
$3,300
|
$2,800
|
|
3
|
$4,800
|
$3,500
|
|
4
|
$6,200
|
$4,000
|
|
5
|
$7,500
|
$4,500
|
|
6
|
$8,700
|
$5,200
|
|
7
|
$9,800
|
$6,000
|
|
8
|
$10,800
|
$7,000
|
|
9
|
$11,700
|
$9,000
|
a. What price maximizes revenue?
b. What price maximizes profit?
c. What is the fixed cost?
d. This firm faces a rival that cuts its revenue significantly. The firm had decided to undertake predatory pricing to drive the other firm out of business. The other firm has a cost structure that looks like the following:
|
Total Cost
|
$2,000
|
$3,000
|
$4,000
|
$5,000
|
$6,000
|
$7,000
|
$8,000
|
|
Total Output
|
0
|
1
|
2
|
3
|
4
|
5
|
6
|
What price would drive the firm out of business? How much would it cost the incumbent firm to drive the rival out of the market? Could the firm raise the price to recoup the losses?
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.