You are a new entrant in a market with just one Incumbent, who sells a roughly equivalent product. You Initially take on the follower role when it comes to choosing the amount of your product to manufacture. In researching your market, you've collected substantial data on prices and quantities, and asked your firm's analysts to determine as closely as possible the Inverse demand curve for the market. They've reported back to you the following table. Price regressed on quantity CoefficientS standard Error t-stat P.value Lower 95t 12677.45369 -2.3438359 Upper 95 Intercept Quantity 13693.75315 -2.144549528 516.335307 26.52104329 -21.18108896 4.68992E-79 14710.05261 0.101248313 1.55351E-60 -1.945263156 Instruction: Round all of your answers to the nearest hundredth. a. Report the estimated inverse demand curve for the market, and comment on whether it is precisely estimated P-[ Both estimated coefficients are statistically significant b. Suppose your marginal costs are $2,000 and the Incumbent produces 4,000 units. What is the profit maximizing quantity you should produce? units C. Suppose your marginal costs are $2,000 and the incumbent's marginal costs are $1,500. What will be the market price if you and the ancumbent produce at your respective profit maximizing levels?
You are a new entrant in a market with just one Incumbent, who sells a roughly equivalent product. You Initially take on the follower role when it comes to choosing the amount of your product to manufacture. In researching your market, you've collected substantial data on prices and quantities, and asked your firm's analysts to determine as closely as possible the Inverse demand curve for the market. They've reported back to you the following table. Price regressed on quantity CoefficientS standard Error t-stat P.value Lower 95t 12677.45369 -2.3438359 Upper 95 Intercept Quantity 13693.75315 -2.144549528 516.335307 26.52104329 -21.18108896 4.68992E-79 14710.05261 0.101248313 1.55351E-60 -1.945263156 Instruction: Round all of your answers to the nearest hundredth. a. Report the estimated inverse demand curve for the market, and comment on whether it is precisely estimated P-[ Both estimated coefficients are statistically significant b. Suppose your marginal costs are $2,000 and the Incumbent produces 4,000 units. What is the profit maximizing quantity you should produce? units C. Suppose your marginal costs are $2,000 and the incumbent's marginal costs are $1,500. What will be the market price if you and the ancumbent produce at your respective profit maximizing levels?
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
Chapter4: Estimating Demand
Section: Chapter Questions
Problem 7E
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