a)
Person A’s yearly profit.
a)
Explanation of Solution
Profit can be calculated using the following equation:
Person A will maximize at
Rewrite Equation (2) as
Substitute the value of Q in Equation 3.
Substitute the values of TR and TC in Equation (1).
The calculated value shows that Person A’s yearly profit is $6,250.
b)
Person A’s new profit.
b)
Explanation of Solution
Rewrite Equation (4) as
Substitute the value of Q in Equation 5.
Substitute the vales of TR and TC in Equation (1).
The calculated value shows that Person A’s new profit is $1,53,125.
c)
The effect of technological advancement on Person A’s profit.
c)
Explanation of Solution
Rewrite Equation (6) as
Substitute the value of Q in Equation (7).
Substitute the values of TR and TC in Equation (1).
The calculated value shows that Person A’s new profit is $2,87,000.
d)
Summarise the lessons from the problem.
d)
Explanation of Solution
The calculations of parts (a), (b), and (c) show that the superstar phenomenon definitely helps to increase profits.
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