Nokia 10, Samsung X and iPhone 7. Suppose further that, your company currently sells 120 units of iPhone Z at e800 per unit, 150 units of Samsung X at e800 per unit and 200 units of Nokia 10 at e100 per unit, but in a bid to maximize profit, the company's managing director proposes an increase in price of Samsung X from e800 to e1000 per unit for which quantity demanded is anticipated to fall from 150 to 100 units; iPhone Z from e800 to e 1200 per unit for which quantity demanded is anticipated to fall from 120 to 100 units; and Nokia 10 from 100 to 200 per unit for which quantity demanded is expected to fall from 200 to 100 units Using the mid-polint formula. compute the price elasticity of demand for each brand. From your answer in i, what is the type and economic interpretatiom of each brand's ii.value of elasticity.

Nokia 10, Samsung X and iPhone 7. Suppose further that, your company currently sells 120 units of iPhone Z at e800 per unit, 150 units of Samsung X at e800 per unit and 200 units of Nokia 10 at e100 per unit, but in a bid to maximize profit, the company's managing director proposes an increase in price of Samsung X from e800 to e1000 per unit for which quantity demanded is anticipated to fall from 150 to 100 units; iPhone Z from e800 to e 1200 per unit for which quantity demanded is anticipated to fall from 120 to 100 units; and Nokia 10 from 100 to 200 per unit for which quantity demanded is expected to fall from 200 to 100 units Using the mid-polint formula. compute the price elasticity of demand for each brand. From your answer in i, what is the type and economic interpretatiom of each brand's ii.value of elasticity.

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter17: Capital And Time

Section: Chapter Questions

Problem 17.10P: Wonopoly and natural resource prices Suppose that a firm is the sole owner of a stock of a natural...

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1. Suppose you are the economic adviser of a company producing three brands of mobile phones; Nokia 10, Samsung X and iPhone Z. Suppose further that, your company currently sells 120 Units of iPhone Z at ¢800 per unit, 150 units of Samsung X at ¢800 per unit and 200 units of Nokia 10 at ¢100 per unit, but in a bid to maximize profit, the company’s managing director proposes an increase in price of Samsung X from ¢800 to ¢1000 per unit for which quantity demanded is anticipated to fall from 150 to 100 units; iPhone Z from ¢800 to ¢1200 per unit for which quantity demanded is anticipated to fall from 120 to 100 units; and Nokia 10 from ¢100 to ¢200 per unit for which quantity demanded is expected to fall from 200 to 100 units. I. Using the mid-point formula, compute the price elasticity of demand for each brand. II. From your answer in i, what is the type and economic interpretation of each brand’s value of elasticity
Suppose you are the economic adviser of a company producing three brands of mobile phones; Nokia 10 , Samsung X and iPhone Z. Suppose further that, your company currently sells 120 units of iPhone Z at ¢800 per unit, 150 units of Samsung X at ¢800 per unit and 200 units of Nokia 10 at ¢100 per unit, but in a bid to maximize profit, the company’s managing director proposes an increase in price of Samsung X from ¢800 to ¢1000 per unit for which quantity demanded is anticipated to fall from 150 to 100 units; iPhone Z from ¢800 to ¢1200 per unit for which quantity demanded is anticipated to fall from 120 to 100 units; and Nokia 10 from¢100 to ¢200 per unit for which quantity demanded is expected to fall from 200 to 100 units. 1.Using the mid-point formula, compute the price elasticity of demand for each brand.2. From your answer in i, what is the type and economic interpretation of each brand’s value of elasticity.
The inverse market demand for fax paper is given by P=100-Q. There are two firms who produce fax paper. Firm 1 has a cost of production of C1= 15*Q1 and firm 2 has a cost of production of C2=20*Q2 a) Suppose firm 1 and firm 2 compute simultaneously in quantities. What are the Cournot quantities and prices?What are the profits of firm 1 and 2?b) Suppose firm 1 and firm 2 compete simultaneously in prices. What are the Bertrand quantities and prices?What are the profits of firm 1 and 2?
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 –1.3 and that it costs $16.20 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. In light of your estimates, are you surprised that the EU might raise concerns about potential anticompetitive effects of the proposed merger? Explain carefully.
Suppose the European Union (EU) was investigated and proposed a 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 −2 and that it costs $16.90 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. Instructions: Do not round intermediate calculations. Enter your final responses rounded to the nearest penny (two decimal places). Pre-merger price: $ Post-merger price: $
Suppose the European Union (EU) was investigated and proposed a 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 −1.3 and that it costs $14.20 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.Instructions: Do not round intermediate calculations. Enter your final responses rounded to the nearest penny (two decimal places).Pre-merger price: $ Post-merger price: $
[The soft drink industry is dominated by two cola firms- DEW and HEW. The market is worth $8 billion. Each firm can decide whether to advertise or not, but advertising costs $2 billion to any firm undertaking it. Moreover, advertising will create only negligible new demand as the market is already saturated. So, for the purpose of this question, assume that the market remains at $8 billion regardless of advertising. If one firm advertises and the other does not, then the former captures the whole market. If both firms advertise, then DEW captures 60% of the market and HEW captures 40% of the market, but the advertising must be paid for. If neither firm advertises, then the market is again split 60:40, with 60% going to DEW and 40% to HEW.] [Draw the payoff matrix for this game where each player’s payoff is equal to the value of market it captures less the cost of advertisement. [Do any of the firms have dominant strategies? If so, what are they? Is there a dominant strategy…
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Suppose that BMW can produce any quantity of cars at a constant marginal cost equal to $20,00 and a fixed cost of $10 billion. You are asked to advise the CEO as to what prices and quantities BMW should set for sales in Europe and in the United States. The demand for BMWs in each market is given by QE=4,000,000−100PE and QU=1,500,000−20PU where the subscript E denotes Europe, the subscript U denotes the United States. Assume that BMW can restrict U.S. sales to authorized BMW dealers only. a. What quantity of BMWs should the firm sell in each market, and what should the price be in each market? What should the total profit be? (round dollar amounts to the nearest penny and quantities to the nearest integer) In Europe equilibrium quantity is 1,000,000 cars at an equilibrium price of $30,000 In United States equilibrium quantity is 550,000 cars at an equilibrium price of $47,500 BMW makes a total profit of $15.125 billion. I Need help with this part: If BMW were forced…
Suppose that BMW can produce any quantity of cars at a constant marginal cost equal to $20,00 and a fixed cost of $10 billion. You are asked to advise the CEO as to what prices and quantities BMW should set for sales in Europe and in the United States. The demand for BMWs in each market is given by QE=4,000,000−100PE and QU=1,500,000−20PU where the subscript E denotes Europe, the subscript U denotes the United States. Assume that BMW can restrict U.S. sales to authorized BMW dealers only. a. What quantity of BMWs should the firm sell in each market, and what should the price be in each market? What should the total profit be? (round dollar amounts to the nearest penny and quantities to the nearest integer) In Europe equilibrium quantity is 1,000,000 cars at an equilibrium price of $30,000 In United States equilibrium quantity is 550,000 cars at an equilibrium price of $47,500 BMW makes a total profit of $15.125 billion. I Need help with this part: If BMW were forced…
Assume that annual inverse demand for a particular product is P=150-Q. The product is offered by a pair of Bertrand competitors, each with marginal costs of $75. The discount factor is 0.9. What is the current equilibrium price and total surplus? Now, assume though that if R&D is conducted at rate x, it incurs one-off costs of r(x)=10x^2 and reduces the marginal costs to (75-x). Suppose that one firm decides to conduct R&D at rate x=10. This research will be protected by a patent of T years. a) What profit(ignoring the one-off costs of R&D) does the innovating firm make each year during the period of patent protection? b) What is the new equilibrium price and total surplus once patent protection expires? c) Use your answer above to write the total surplus from the innovation
Two firms sell an identical product in a market by setting prices simultaneously. Consumers buy from the firm that offers the lower price; if the prices are identical, the firms split the demand. If ? is the lowest price (in dollars), aggregate demand is ? = 250 − ?. Suppose prices can only be set in increments of 1 cent. (a) Suppose Firm 1 and Firm 2 have limited production capacities of 40 units each. The marginal cost of firm 1 is $35 and the marginal cost of firm 2 is $25. If Firm 1 believes that Firm 2 will set a price of $30, what price should Firm 1 set? Show your work. (Assume efficient rationing while calculating firm’s residual demand.) (b) Ignore the information in part (a). Suppose each firm has unlimited capacity, but that the marginal costs of Firm 1 and Firm 2 are $40 and $150 respectively. Do ?1 = 149.99 and ?2 = 150 satisfy the requirements of a Nash equilibrium? Explain why. You must explain why a strategy is a best response or not to the other strategy.