A computer hardware firm sells both laptop computers and printers. Through the magic of focus groups, their pricing team determines that they have an equalnumber of three types of customers, and that these customers' reservation prices are as illustrated in the figure below.Customer ACustomer BCustomer Cand a price for printers ofLaptop$750$950$650Assume for simplicity the marginal cost of production for laptops and printers is zero.If the firm were to charge only individual prices (not use the bundle price), what prices should it set for its laptops and printers to maximize profit? Assuming forsimplicity that the firm has only one customers of each type, how much does it earn in total?To maximize profit using individual prices, the firm should charge a price for laptops ofP= 650P= 100Printer$100$50$150Bundle$850$1,000$800(Enter your responses as whole numbers.)In turn, profit is = $ 2150 (Enter your response as a whole number.)After conducting a costly study, an outside consultant claims that the company could make more money from its customers if it sold laptops and printers togetheras a bundle instead of separately. Is the consultant right? Assume again that the firm has one customer of each type and that marginal cost is zero. How muchdoes the firm earn in total from pure bundling?The profit-maximizing pure bundle price is $(Enter your response as a whole number.)Pslong

The firm will be able to sell their product if the reservation price of the consumer is above their…

To maximize profit using individual prices, the firm should charge a price for laptops of p = 650 and a price for printers of p= 100 (Enter your responses as whole numbers.) In turn, profit is =$ 2150 (Enter your response as a whole number.) After conducting a costly study, an outside consultant claims that the company could make more money from its customers if it sold laptops and printers togethe as a bundle instead of separately. Is the consultant right? Assume again that the firm has one customer of each type and that marginal cost is zero. How much does the firm earn in total from pure bundling? The profit-maximizing pure bundle price is $ (Enter your response as a whole number.)

To maximize profit using individual prices, the firm should charge a price for laptops of p = 650 and a price for printers of p= 100 (Enter your responses as whole numbers.) In turn, profit is =$ 2150 (Enter your response as a whole number.) After conducting a costly study, an outside consultant claims that the company could make more money from its customers if it sold laptops and printers togethe as a bundle instead of separately. Is the consultant right? Assume again that the firm has one customer of each type and that marginal cost is zero. How much does the firm earn in total from pure bundling? The profit-maximizing pure bundle price is $ (Enter your response as a whole number.)

Principles of Microeconomics (MindTap Course List)

8th Edition

ISBN:9781305971493

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter17: Oligopoly

Section: Chapter Questions

Problem 9PA

See similar textbooks

Similar questions

Sometimes oligopolies in the same industry are very different in size. Suppose we have a duopoly where one firm (Film A) is large and the other film (Film B) is small, as the prisoners dilemma box in Table 10.4 shows. Assuming that both films know the payoffs, what is the likely outcome in this case?
DuopolyMarket for mechanical pencils can be described by the following demand schedule:Price | Number of pencils demanded$6 | 80$5 | 200$4 | 320$3 | 440$2 | 560$1 | 680$0 | 800The fixed cost is $340, while the variable cost is $0.50.d) If there were two firms on the market and they agreed to cooperate, how much would eachfirm need to produce? Follow the procedure outlined in the lecture and show that the otherfirm would prefer to deviate from the agreement.e) When the firms deviate from the agreement, there is a new optimal level of output. Showwhether the firms have an incentive to deviate from that level?f) If there were two firms on the market, what would be the price and the quantity of pencilstraded if the firms couldn’t cooperate?
Consider a quantity-setting duopoly. The two firms are Alpha, Ltd. and Beta, Inc. The demand schedulein this market is: p Qd180 150155 175130 200Each firm has a constant marginal cost of 30 per unit. Suppose each firm can choose to produce either 75units or 100 units. Firms make their quantity choices simultaneously and the market price is whatever itneeds to be to sell the total output in the market.(a) Draw up the normal form game matrix, showing the players, strategies, and payoffs. Show your workdetermining the profits in each box in the matrix.(b) Determine the Nash equilibrium of this game.(c) Suppose the firms were able to come to an agreement to make more profit. What would this agreementbe?(d) Explain how the government might respond to such an agreement and why.
1. Two firms (A and B) play a competition game (i.e. Cournot) in which they can choose any Qi from 0 to ¥. The firms have the same cost functions C(Qi) = 10Qi + 0.5Qi2, and thus MCi = 10 + Qi. They face a market demand curve of P = 220 – (QA + QB). Now assume firm A chooses quantity first. Firm B observes this choice and then chooses its own quantity. d)Firm A has MRA = 150 – 4QA/3. What are the equilibrium QA and QB selected in this game? e)What is the equilibrium price, and how much profit does each firm collect?
Mavi and Diesel both make basic blue jeans. The demand curves for the two firms are given by Qm=135,000−3000Pm+1200Pd Qd=154,000−4000Pd+1000Pw suppose it is a price equilibrium for Mavi to set a price of $30 per pair of jeans and Diesel to set a price of $25. What is marginal cost for Mavi What is marginal cost for Diesel
A6 In Changlun, Kedah, there are two bakers, Abu and Bakar. Their bread taste the same and nobody can tell the difference. Abu has constant marginal costs of RM1 per loaf of bread. Bakar has constant marginal costs of RM2 per loaf. Fixed costs are zero for both of them. The inverse demand function for bread in Changlun is p(q) = 6 – 0.01(qA + qB), where q is the total number of loaves sold per day. Find the reaction function for Abu and Bakar. What is the Cournot Nash equilibrium number of loaves of bread for each baker?
1. Two firms (A and B) play a competition game (i.e. Cournot) in which they can choose any Qi from 0 to ¥. The firms have the same cost functions C(Qi) = 10Qi + 0.5Qi2, and thus MCi = 10 + Qi. They face a market demand curve of P = 220 – (QA + QB). a. Assume firm A chooses quantity first. Frim B observes this choice and then chooses its own quantity. What is Frim B's profit as a function of QA and QB? b. Firm B has MRB = 220 – 2QB – QA. What is firm B’s best response to an arbitrary QA selected by firm A? c. Given that firm A expects firm B’s best response, what is firm A’s profit as a function of QA? (Hint: the only unknown variable in the profit function should be QA) d. Firm A has MRA = 150 – 4QA/3. What are the equilibrium QA and QB selected in this game? e. What is the equilibrium price, and how much profit does each firm collect?
TotsPoses Inc., a profit-maximizing business, is the only photography business in town that specializes in portraits of small children. George, who owns and runs TotsPoses, expects to encounter an average of eight customers per day, each with a reservation price (shown in the following table). Assume George has no fixed costs, and his cost of producing each portrait is $12. a. How much should George charge if he must charge a single price to all customer? At this price, how many portraits will George produce each day? What will be his economic profit? b. How much consumer surplus is generated each day at this price? c. If George is very experienced and knows the reservation prices of each customer, how many portraits will he produce each day and how much economic profit will he earn? d. Assume George charges only 2 different prices. He know that customers with reservation prices above $30, will never use coupons and the customers with reservation prices below will always use…
Two firms are engaged in Bertrand competition. There are 10,000 people in the population, each of whom is willing to pay at most 10 for at most one unit of the good. Both firms have a constant marginal cost of 5. Each firm is allocated half the market. It costs a customer s to switch from one firm to the other. Customers know what prices are being charged. Law or custom restricts the firms to charging whole-dollar amounts (e.g., they can charge 6, but not 6.50). a. Suppose that s = 0. What are the Nash equilibria of this model? Why does discrete (whole-dollar) pricing result in more equilibria than continuous pricing? b. Suppose that s = 2. What is (are) the Nash equilibrium (equilibria) of this model? c. Suppose that s = 4. What is (are) the Nash equilibrium (equilibria) of this model? d. Comparing the expected profits in (b) to those in (c), what is the value of raising customers’ switching costs from 2 to 4?.
COURSE: MICROECONOMICS - Stackelberg ModelIn a given market good there are only 2 firms that satisfy the demand, and their respective total cost functions are: CTi = 400 and the demand that is estimated is P = 120 - 2QIf the exception variable of both firms is the quantity they will produce, such that the decisions to produce are made sequentially firm number 1 will be the leader who decides the quantity to produce and firm number 2 (follower) decides based on the production of firm number 1, we ask:(a) quantity produced by each firm and its equilibrium price in the market.(b) Profit of each company at equilibrium and (c) Graph your results
As the new general manager of the Grand Palladium Jamaica luxury all-inclusive resort, youare assessing your pricing policies. Currently, the price of a weekend stay is $2,000 perguest. You estimate the marginal cost of serving a guest at $1,600, and while yourpredecessor unfortunately did not leave you data from the pricing experiments and testmarketing she performed, you do know that such experiments were done, and that yourpredecessor was competent.a. What is your best estimate of the elasticity of demand for a weekend stay at the GrandPalladium?b. Your learned that at the current price, the resort is only 80% full on the weekends.Remembering the sense of belonging that you experienced in a crowded subway duringthe rush hour, you contemplate lowering the price so the resort is completely full. What isyour back-of-the-envelope calculation for how much you need to lower the price?c. After some thought you cooled to the idea of full occupancy. Instead, you focused yourenergy and…
There are only two driveway paving companies in a small town, Asphalt, Inc. and Blacktop Bros. The inverse demand curve for paving services is ?= 2040 ―20? where quantity is measured in pave jobs per month and price is measured in dollars per job. Assume Asphalt, Inc. has a marginal cost of $100 per driveway and Blacktop Bros. has a marginal cost of $150. Answer the following questions: Determine each firm’s reaction curve and graph it. How many paving jobs will each firm produce in Cournot equilibrium? What will the market price of a pave job be? How much profit does each firm earn?