MANAGERIAL/ECON+BUS/STR CONNECT ACCESS
9th Edition
ISBN: 2810022149537
Author: Baye
Publisher: MCG
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Question
Chapter 11, Problem 9CACQ
To determine
Whether a profit-maximizing firm would never use something like dice or roulette wheel to help shape the pricing decisions is to be explained.
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Your task is to show what the profit of this firm might look like using a key economics diagram.
To make graphing easier, we will consider the price of the Ozempic drug for the middle-income
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For this task, you will be required to illustrate and explain to a typical first-year undergrad student
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Deborah sells bottled water from a small stand by the beach. On the last day of summer vacation, many people are on the beach, and Deborah
realizes that she can make a lot more money this day if she hires someone to walk up and down the beach selling water. She finds a college student
named Carlos and makes him the following offer: They'll each sell water all day and split their earnings (revenue minus the cost of water) equally at
the end of the day. Deborah knows that if they both work hard, Carlos will earn $90 on the beach and Deborah will earn $180 at her stand, so they
will each take home half of their total revenue:
= $135. If Carlos shirks, he'll generate only $50 in earnings. Deborah does not know that
Carlos estimates his personal cost (or disutility) of working hard as opposed to shirking at $25.
$90+$180
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Chapter 11 Solutions
MANAGERIAL/ECON+BUS/STR CONNECT ACCESS
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- why is competition good for the consumer from an economics perspectivearrow_forwardSuppose that managers at Honda are deciding how to price the new Honda Accord. The managers estimate that their total costs increase by $20,000 for each car they produce. They also estimate the demand curve they face; it is described by the equation: Q = -0.4 P + 16,000, where Q represents the quantity of Honda Accords they will sell and P represents the price they charge in US dollars. We can re-write that demand curve as: P = 40,000 - 2.5 Q. Take every possibly quantity that the managers might choose between 0 and 7,000 in units of 100. For each possible quantity, calculate the associated price the managers would need to charge, the revenue they would earn, and the total costs. You can then calculate profits for each level of quantity. Highlight the cell that contains the highest value of profit.arrow_forwardSuppose that managers at Honda are deciding how to price the new Honda Accord. The managers estimate that their total costs increase by $20,000 for each car they produce. They also estimate the demand curve they face; it is described by the equation: Q = -0.4 P + 16,000, where Q represents the quantity of Honda Accords they will sell and P represents the price they charge in US dollars. We can re-write that demand curve as: P = 40,000 - 2.5 Q. Take every possibly quantity that the managers might choose between and 7,000 in units of 100. For each possible quantity, calculate the associated price the managers would need to charge, the revenue they would earn, and the total costs. You can then calculate profits for each level of quantity. Highlight the cell that contains the highest value of profit. Finally, you can also approximate marginal revenue here as the change in total revenue after the next 100 cars are produced. At what quantity does marginal revenue roughly equal marginal cost?…arrow_forward
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