Answer to Question #4801 in Microeconomics for sam

Question

Robert Johnson, manager of Kentucky Fried Chicken franchise, is thinking of introducing barbecued chicken in the product line. Its profitability will be based on the fact that the barbecue sause will cover up the lack of freshness in the leftover chicke. He is thinking of pricing the barbecued chicken at $5.00 a bucket for 24 piences. His cost for the same chicken is $3.00. His fixed cost assignable to the barbecuing operation is $1,500.00. He plans to spend $400 per period in promoting the new product. Using highly sophisticated regression anaylsis, he has determined the demand funcion is Q = 1000. He estimates his profit per period will be?

Answer 1

P = TR - TC = P Q - FC - VC = 5 1000 - 1500 - 400 - 3 1000 = 100$, so he will
estimate the profit of 100$