You are the manager of a small U.S. firm that sells nails in a competitive U.S. market (the nails you sell are a standardized commodity; stores view your nails as identical to those available from hundreds of other firms). You are concerned about two events you recently learned about through trade publications: (1) the overall market supply of nails will decrease by 2 percent, due to exit by foreign competitors, and (2) due to a growing U.S. economy, the overall market demand for nails will increase by 2 percent. Based on this information, should you plan to increase or decrease your production of nails? Explain.
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You are the manager of a small U.S. firm that sells nails in a competitive U.S. market (the nails you sell are a standardized commodity; stores view your nails as identical to those available from hundreds of other firms). You are concerned about two events you recently learned about through trade publications: (1) the overall market supply of nails will decrease by 2 percent, due to exit by foreign competitors, and (2) due to a growing U.S. economy, the overall market demand for nails will increase by 2 percent. Based on this information, should you plan to increase or decrease your production of nails? Explain.
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- You are the country manager of a firm that produces and markets a generic type of soft drink in a competitive market in Ghana. In addition to the large number of generic products in your market, you also compete against major brands such as Coca-Cola and Pepsi. Suppose that, due to the successful lobbying efforts of sugar producers in Ghana, Parliament levies a ȼ1.20 per pound tariff on all imported raw sugar: the primary input for your product. In addition, Coke and Pepsi launches an aggressive advertising campaign designed to persuade consumers that their branded products are superior to generic soft drinks. How will these events impact the market outcomes of generic soft drinks if effect of the tariff is larger the effect of advertising of Coke and Pepsi on the generic type of soft drink? [Explain with an appropriate graph]You are the country manager of a firm that produces and markets a generic type of soft drink in a competitive market in Ghana. In addition to the large number of generic products in your market, you also compete against major brands such as Coca-Cola and Pepsi. Suppose that, due to the successful lobbying efforts of sugar producers in Ghana, Parliament levies a ȼ1.20 per pound tariff on all imported raw sugar: the primary input for your product. In addition, Coke and Pepsi launches an aggressive advertising campaign designed to persuade consumers that their branded products are superior to generic soft drinks. How will these events impact the market outcomes of generic soft drinks if effect of the tariff is larger the effect of advertising of Coke and Pepsi on the generic type of soft drink?You are the manager of a firm that produces and markets a generic type of soft drink in a competitive market. In addition to the large number of generic products in your market, you also compete against major brands such as Coca-Cola and Pepsi. Suppose that, due to the successful lobbying efforts of sugar producers in the United States, Congress is going to levy a $0.50 per pound tariff on all imported raw sugar—the primary input for your product. In addition, Coke and Pepsi plan to launch an aggressive advertising campaign designed to persuade consumers that their branded products are superior to generic soft drinks. How will these events impact the equilibrium price and quantity of generic soft drinks?
- You are the manager of a firm that manufactures front and rear windshields for the automobile industry. Due to economies of scale in the industry, entry by new firms is not profitable. Toyota has asked your company and your only rival to simultaneously submit a price quote for supplying 100,000 front and rear windshields for its new Highlander. If both you and your rival submit a low price, each firm supplies 50,000 front and rear windshields and earns a $1 million in profits. If one firm quotes a low price and the other a high price, the low-price firm supplies 100,000 front and rear windshields and earns a profit of $11 million and the high-price firm supplies no windshields and loses $2 million. If both firms quote a high price, each firm supplies 50,000 front and rear windshields and earns a $6 million profit. The new Highlander is a “special edition” that will be sold only for one year. a. Supported by this information, complete the payoff matrix. (values are in million)…You are the manager of a firm that manufactures front and rear windshields for the automobile industry. Due to economies of scale in the industry, entry by new firms is not profitable. Toyota has asked your company and your only rival to simultaneously submit a price quote for supplying 100,000 front and rear windshields for its newest version of the Highlander. If both you and your rival submit a low price, each firm supplies 50,000 front and rear windshields and earns a zero profit. If one firm quotes a low price and the other a high price, the low-price firm supplies 100,000 front and rear windshields and earns a profit of $11 million and the high-price firm supplies no windshields and loses $2 million. If both firms quote a high price, each firm supplies 50,000 front and rear windshields and earns a $6 million profit. Determine your optimal pricing strategy if you and your rival believe that the new Highlander is a “special edition” that will be sold only for one year. Would your…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.
- You are the manager of a local sporting goods store and recently purchased a shipment of 60 sets of skis and ski bindings at a total cost of $25,000 (your wholesale supplier would not let you purchase the skis and bindings separately, nor would it let you purchase fewer than 60 sets). The community in which your store is located consists of many different types of skiers, ranging from advanced to beginners. From experience, you know that different skiers value skis and bindings differently. However, you cannot profitably price discriminate because you cannot prevent resale.There are about 20 advanced skiers who value skis at $400 and ski bindings at $275; 20 intermediate skiers who value skis at $300 and ski bindings at $400; and 20 beginning skiers who value skis at $200 and ski bindings at $350.What is your maximum revenue if you charge a separate price for skis and bindings?$ What is your maximum revenue if you sell skis and bindings as a bundle?$You are the manager of a local sporting goods store and recently purchased a shipment of 60 sets of skis and ski bindings at a total cost of $25,000 (your wholesale supplier would not let you purchase the skis and bindings separately, nor would it let you purchase fewer than 60 sets). The community in which your store is located consists of many different types of skiers, ranging from advanced to beginners. From experience, you know that different skiers value skis and bindings differently. However, you cannot profitably price discriminate because you cannot prevent resale. There are about 20 advanced skiers who value skis at $400 and ski bindings at $275; 20 intermediate skiers who value skis at $300 and ski bindings at $400; and 20 beginning skiers who value skis at $200 and ski bindings at $350. Determine your optimal pricing strategy.You are the manager of BlackSpot Computers, which competes directly with Condensed Computers to sell highpowered computers to businesses. From the two businesses’ perspectives, the two products are indistinguishable. The large investment required to build production facilities prohibits other firms from entering this market, and existing firms operate under the assumption that the rival will hold output constant. The inverse market demand for computers is P=5900-Q , and both firms produce at a marginal cost of $800 per computer. Currently, BlackSpot earns revenues of $4.25 million and profits (net of investment, R&D, and other fixed costs) of $890,000. The engineering department at BlackSpot has been steadily working on developing an assembly method that would dramatically reduce the marginal cost of producing these high-powered computers and has found a process that allows it to manufacture each computer at a marginal cost of $500. How will this technological advance impact your…
- You are about to go live with a Latin music download service that will compete head-to-head with Apple's iTunes®. You will be selling digital albums of regional (Mexican/Tejano) music for $5 each, pop/rock albums for $4 each, and tropical (salsa/merengue/cumbia/bachata) for $6 each. Your servers can handle up to 33,000 downloaded albums per day, and you anticipate on the basis of national sales, revenues from regional music will be at least five times those from tropical music. You also anticipate that you will sell at least 19,000 pop/rock albums per day as a result of the very attractive $4 price. On the basis of these assumptions, how many of each type of album should you sell for a maximum daily revenue? regional music albumspop/rock music albumstropical music albums What will your daily revenue be?You are the manager of an organization in America that distributes blood to hospitals in all 50 states and the District of Columbia. A recent report indicates that nearly 50 Americans contract HIV each year through blood transfusions. Although every pint of blood donated in the United States undergoes a battery of nine different tests, existing screening methods can detect only the antibodies produced by the body’s immune system – not foreign agents in the blood. Since it takes weeks or even months for these antibodies to build up in the blood, newly infected HIV donors can pass along the virus through blood that has passed existing screening tests. Happily, researchers have developed a series of new tests aimed at detecting and removing infections from donated blood before it is used in transfusions. The obvious benefit of these tests is the reduced incidence of infection through blood transfusions. The report indicates that the current price of decontaminated blood is $60 per pint.…You are the manager of an organization in America that distributes blood to hospitals in all 50 states and the District of Columbia. A recent report indicates that nearly 50 Americans contract HIV each year through blood transfusions. Although every pint of blood donated in the United States undergoes a battery of nine different tests, existing screening methods can detect only the antibodies produced by the body’s immune system—not foreign agents in the blood. Since it takes weeks or even months for these antibodies to build up in the blood, newly infected HIV donors can pass along the virus through blood that has passed existing screening tests. Happily, researchers have developed a series of new tests aimed at detecting and removing infections from donated blood before it is used in transfusions. The obvious benefit of these tests is the reduced incidence of infection through blood transfusions. The report indicates that the current price of decontaminated blood is $60 per pint.…