Toot Boot's Cost, Demand, and Pricing Analysis

Homework 21. What is Toot Boot.s .xed cost? What is its marginal cost?
c (Q) = 8000+100Q.
Fixed cost is 8000
Marginal cost is = TC = 8000Q+ 100Q^2
MC = 8000 – 200Q
2. Toot Boot sells its boots in London, where the yearly demand for the
boots is described by the straight line equation P = 1100 - 4Q.
(a)What are the pro.t-maximizing price and quantity?
TR = 1100Q – 4Q2
MR = 1100 – 8Q
MC = MR
8000 – 200Q = 1100 – 8Q
= 8000 – 1100 =- 8Q + 200Q
= 7900 = 192Q
Q = 41.14
P = 1100 – 4(41.14)
= 935.44
(b)What are Toot Boot.s (yearly) pro.t and average cost?
Profits = TR – TC
=TC = 8000 + 100 (35.63)
= 11563
TR = 35.63* 935.44
= 33329.73

Profit = 33329.7272 – 11563
= 21766.73
Average cost = TC/Q
= 8000Q – 200Q^2
= 8000 – 200Q
= 8000 – 200(35.63)
= 874
(c)What is the consumer surplus?
Consumer surplus
1100 – 4(35.63)
= 957.48 - 935.44
= 22.04
(d) A year has gone by and Toot Boot.s costs function is now c (Q) =
9500 + 100Q: What price should Toot Boot charge now? What
are its pro.ts?
TC = 9500Q – 100q^2
9500 – 200Q = 1100 – 8Q
=8400 = 192Q
Q = 43.75
P = 1100 – 4(43.75)
= 925

=TC = 8000 + 100 (35.63)
= 11563
TR = 35.63* 925
= 32957.75
Profit = 32957.75 – 11563
= 21394.75
3. As an experiment, Toot Boot had decided to o¤er delivery service to
customers in Edinburgh. It costs Toot Boot £ 10 to ship a pair of boots
there. The demand curve in Edinburgh is the same as in London.
(a) What price should Toot Boot charge for the boots it ships to
Edinburgh?
TC = 9510Q – 100q^2
9510 – 200Q = 1100 – 8Q
=8410 = 192Q
Q = 43.8020833
P = 1100 – 4(43.8020833)
= 924.7917
(b) What fraction of the shipping cost does Toot Boot pass on to the
Edinburgh customers?
1%
4. Toot Boot has found that shipping boots poses unexpected quality
control issues and has decided to stop its delivery service. Instead, it
has opened a branch in Manchester, where the demand curve is given