Managerial Economics & Organizational Architecture 6th Edition by James Brickley , Clifford Smith ,Jerold Zimmerman

Exercise 33

Assume DurableTires Corp. faces the following demand curve, P=250 - 0.1Q. If DurableTires' marginal cost is constant at $35, how many tires should it produce in order to maximize its profits What's DurableTires' profit in this case Should the elasticity of demand be greater, equal, or less than 1 at the profit-maximizing price and quantity Explain ( hint : you may use a graph to support your argument).