Based on the best available econometric estimates, the market elasticity of demand for your firm’s product is -2.5. The marginal cost of producing the product is constant at $100, while average total cost at current production levels is $175. Determine your optimal per unit price if: Instruction:Round your answers to two decimal places. a. You are a monopolist. $ b. You compete against one other firm in a Cournot oligopoly. $ c. You compete against 19 other firms in a Cournot oligopoly. $
1.
Based on the best available econometric
estimates, the market
marginal cost of producing the product is constant at $100, while
cost
Determine your optimal per unit
Instruction:Round your
answers to two decimal places.
a. You are a monopolist.
$
b. You compete against one other firm in a
Cournot oligopoly.
$
c. You compete against 19 other firms in a
Cournot oligopoly.
$
2.
You are the manager of a
product to two groups of consumers in different parts of the country. Group 1’s
elasticity of demand is -2, while group 2’s is -6. Your marginal cost of
producing the product is $10.
a. Determine your optimal markups and prices
under third-degree
Instruction:Round your
answers to two decimal places.
Markup for group 1:
Price for group 1: $
Markup for group 2:
Price for group 2: $
b. Which of the following are necessary conditions
for third-degree price discrimination to enhance profits.
3.
A monopoly is considering selling several units
of a homogeneous product as a single package. A typical consumer’s demand for
the product isQd= 100 – 0.5P, and the
marginal cost of production is $80.
a. Determine the optimal number of units to put
in a package.
units
b. How much should the firm charge for this
package?
$
4.
You are the owner of a local Honda dealership.
Unlike other dealerships in the area, you take pride in your “No Haggle†sales
policy. Last year, your dealership earned record profits of $1.7 million. In
your market, you compete against two other dealers, and the market-level
elasticity of demand
five years, your dealership has sold more midsized automobiles than any other
Honda dealership in the nation. This entitled your dealership to an additional
25 percent off the manufacturer’s suggested retail price (MSRP) in each year.
Taking this into account, your marginal cost of a midsized automobile is
$11,000.
What price should you charge for a midsized
automobile if you expect to maintain your record sales?
Instruction:Round your answer
to two decimal places.
$
5.
The American Baker’s Association reports that
annual sales of bakery goods last year rose 15 percent, driven by a 50 percent
increase in the demand for bran muffins. Most of the increase was attributed to
a report that diets rich in bran help prevent certain types of cancer. You are
the manager of a bakery that produces and packages gourmet bran muffins, and
you currently sell bran muffins in packages of three. However, as a result of
this new report, a typical consumer’s inverse demand for your bran muffins is
nowP= 4 – 0.5Q.
If your cost of producing bran muffins isC(Q) = 1.5Q,determine the optimal number of bran
muffins to sell in a single package and the optimal package price.
Instruction:Round your answer
for the optimal package price to two decimal places.
Optimal package size:units
Optimal package price: $
6.
Suppose the European Union (EU) is
investigating a proposed merger between two of the largest distillers of
premium Scotch liquor. Based on some economists’ definition of the relevant
market, the two firms proposing to merge enjoyed a combined market share of
about two-thirds, while another firm essentially controlled the remaining share
of the market. Additionally, suppose that the (wholesale) market elasticity of
demand for Scotch liquor is -1.6 and that it costs $14.80 to produce and
distribute each liter of Scotch.
Based only on these data, provide quantitative
estimates of the likely pre- and postmerger prices in the wholesale market for
premium Scotch liquor.
Instruction:Do not round
intermediate calculations. Round your final answers to the nearest penny (two
decimal places).
Pre-merger price: $
Post-merger price: $
Trending now
This is a popular solution!
Step by step
Solved in 5 steps with 3 images
