MANAGERIAL/ECON+BUS/STR CONNECT ACCESS
9th Edition
ISBN: 2810022149537
Author: Baye
Publisher: MCG
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Chapter 10, Problem 18PAA
To determine
The optimal price for company A and whether the company should invest $2 million or not.
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You are a pricing manager at Argyle Inc.—a medium-sized firm that recently introduced a new product into the market. Argyle’s only competitor is Baker Company, which is significantly smaller than Argyle. The management of Argyle has decided to pursue a short-term strategy of maximizing this quarter’s revenues, and you are in charge of formulating a strategy that will permit the firm to do so. After talking with an employee who was recently hired from the Baker Company, you are confident that (a) Baker is constrained to charge $10 or $20 for its product, (b) Baker’s goal is to maximize this quarter’s profits, and (c) Baker’s relevant unit costs are identical to yours. You have been authorized to price the product at two possible levels ($5 or $10) and know that your relevant costs are $2 per unit. The marketing department has provided the following information about the expected number of units sold (in millions) this quarter at various prices to help you formulate your decision: Argyle…
You are a pricing manager at Argyle Inc.—a medium-sized firm that recently introduced a new product into the market. Argyle’s only competitor is Baker Company, which is significantly smaller than Argyle. The management of Argyle has decided to pursue a short-term strategy of maximizing this quarter’s revenues, and you are in charge of formulating a strategy that will permit the firm to do so. After talking with an employee who was recently hired from the Baker Company, you are confident that:(a) Baker is constrained to charge $10 or $20 for its product,(b) Baker’s goal is to maximize this quarter’s profits, and(c) Baker’s relevant unit costs are identical to yours.You have been authorized to price the product at two possible levels ($5 or $10) and know that your relevant costs are $2 per unit. The marketing department has provided the following information about the expected number of units sold (in millions) this quarter at various prices to help you formulate your decision:…
You are the manager of medium-sized company that assembles personal computers in Ghana. You purchased most components such as random access memory (RAM), which is an input for your personal computers, on a competitive market. Based on your marketing research, consumers view personal computers in the Ghanaian market as a normal good. One morning, you picked up a copy of the Graphic Business, published by the Graphic Communications Group limited, and read an article indicating that the price of RAM have been increased effective the next day, forcing manufacturers to produce computers at a high unit cost. In addition, the article indicated that consumer incomes are expected to fall over the next two years as the economy dips into recession. Explain your answer with an appropriate diagram, how these events would affect the equilibrium price and quantity.
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MANAGERIAL/ECON+BUS/STR CONNECT ACCESS
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