Suppose that BMW can produce any quantity of cars at a constant marginal cost equal to $20,000 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 the U.S. is given by Qu = 1, 000, 000 – 20P. The demand for BMWs in Europe is given by QE E = 4,000,000 - 100PE. All prices and costs are in U.S. dollars. Assume that the company can prevent resale between the two markets.
Suppose that BMW can produce any quantity of cars at a constant marginal cost equal to $20,000 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 the U.S. is given by Qu = 1, 000, 000 – 20P. The demand for BMWs in Europe is given by QE E = 4,000,000 - 100PE. All prices and costs are in U.S. dollars. Assume that the company can prevent resale between the two markets.
Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
14th Edition
ISBN:9781305506381
Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Chapter10: Prices, Output, And Strategy: Pure And Monopolistic Competition
Section: Chapter Questions
Problem 9E
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