In 2006. the five leading suppliers of digital cameras in the United States were Canon. Sony, Kodak. Olympus. and Samsung. The combined market share of these five firms was 60.9 percent. The leading firm was Canon, with a market share of 18.7 percent. The own
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Managerial Economics & Business Strategy (Mcgraw-hill Series Economics)
- Suppose the European Union (EU) was investigated and proposed a merger between two of the largest distillers of premium Scotch liquor. Based on some economists' definition of the relevant market, the two firms proposing to merge enjoyed a combined market share of about two-thirds, while another firm essentially controlled the remaining share of the market. Additionally, suppose that the (wholesale) market elasticity of demand for Scotch liquor is -1.4 and that it costs $16.50 to produce and distribute each liter of Scotch. Based only on these data, provide quantitative estimates of the likely pre- and postmerger prices in the wholesale market for premium Scotch liquor. Instructions: Do not round intermediate calculations. Enter your final responses rounded to the nearest penny (two decimal places). Pre-merger price: $ 9.65 Numeric Response 1. Edit Unavailable. 9.65 incorrect. Post - merger price: $ 11.22 incorrectarrow_forwardSuppose the European Union (EU) was investigated and proposed a merger between two of the largest distillers of premium Scotch liquor. Based on some economists' definition of the relevant market, the two firms proposing to merge enjoyed a combined market share of about two-thirds, while another firm essentially controlled the remaining share of the market. Additionally, suppose that the (wholesale) market elasticity of demand for Scotch liquor is -1.4 and that it costs $15.90 to produce and distribute each liter of Scotch. Based only on these data, provide quantitative estimates of the likely pre- and postmerger prices in the wholesale market for premium Scotch liquor. Instructions: Do not round intermediate calculations. Enter your final responses rounded to the nearest penny (two decimal places). Pre-merger price: $ Post-merger price: $arrow_forwardIn 2006, the five leading suppliers of digital cameras in the United States were Canon,Sony, Kodak, Olympus, and Samsung. The combined market share of these five firmswas 60.9 percent. The leading firm was Canon, with a market share of 18.7 percent. Theown price elasticity for Canon’s cameras was –4.0 and the market elasticity of demandwas –1.6. Suppose that in 2006, the average retail price of a Canon digital camera was$240 and that Canon’s marginal cost was $180 per camera.Based on the above information, discuss industry concentration, demand and market conditions, and the pricing behavior of Canon in 2006 and explain how the industry environment significantly influence the performance of the digital camera firms.arrow_forward
- In 2006, the five leading suppliers of digital cameras in the United States were Canon,Sony, Kodak, Olympus, and Samsung. The combined market share of these five firmswas 60.9 percent. The leading firm was Canon, with a market share of 18.7 percent. Theown price elasticity for Canon’s cameras was –4.0 and the market elasticity of demandwas –1.6. Suppose that in 2006, the average retail price of a Canon digital camera was$240 and that Canon’s marginal cost was $180 per camera. Suppose you were the CEO of Kodak, what would you do to avoid its business failure? Please apply the specific tools from managerial economics to the case analysisarrow_forwardIn 2006, the five leading suppliers of digital cameras in the United States were Canon,Sony, Kodak, Olympus, and Samsung. The combined market share of these five firmswas 60.9 percent. The leading firm was Canon, with a market share of 18.7 percent. Theown price elasticity for Canon’s cameras was –4.0 and the market elasticity of demandwas –1.6. Suppose that in 2006, the average retail price of a Canon digital camera was$240 and that Canon’s marginal cost was $180 per camera. Based on the above information, discuss industry concentration, demand and market conditions, and the pricing behavior of Canon in 2006 and explain how the industry environment significantly influence the performance of the digital camera firmsarrow_forwardSuppose the European Union (EU) was investigated and proposed a merger between two of the largest distillers of premium Scotch liquor. Based on some economists’ definition of the relevant market, the two firms proposing to merge enjoyed a combined market share of about two-thirds, while another firm essentially controlled the remaining share of the market. Additionally, suppose that the (wholesale) market elasticity of demand for Scotch liquor is −1.4 and that it costs $14.80 to produce and distribute each liter of Scotch.Based only on these data, provide quantitative estimates of the likely pre- and postmerger prices in the wholesale market for premium Scotch liquor.Instructions: Do not round intermediate calculations. Enter your final responses rounded to the nearest penny (two decimal places).Pre-merger price: $ Post-merger price: $arrow_forward
- Assume that the price elasticity of demand for movie theatres is -.85 during the evening shows but for afternoon shows the price elasticity of demand is -2.28. For the theatre to maximize total revenue it should charge the same price for both shows, holding all else constant charge a higher price for the afternoon shows and a lower price for the evening shows, holding all else constant charge a lower price for the afternoon shows and a higher price for evening shows, holding all else constant there is not enough information to determine a pricing strategyarrow_forwardSuppose the European Union (EU) is investigating a proposed merger between two of the largest distillers of premium Scotch liquor. Based on some economists’ definition of the relevant market, the two firms proposing to merge enjoyed a combined market share of about two-thirds, while another firm essentially controlled the remaining share of the market. Additionally, suppose that the (wholesale) market elasticity of demand for Scotch liquor is –1.3 and that it costs $16.20 to produce and distribute each liter of Scotch. Based only on these data, provide quantitative estimates of the likely pre- and postmerger prices in the wholesale market for premium Scotch liquor. In light of your estimates, are you surprised that the EU might raise concerns about potential anticompetitive effects of the proposed merger? Explain carefully.arrow_forwardLe Jouet is a French firm, and it is the only seller of toy trains in France and Russia. Suppose that when the price of toy trains increases, Russian children more readily replace them with toy airplanes than French children. Thus, the demand for toy trains in Russia is more elastic than in France. The following graphs show the demand curves for toy trains in France (Dr) and Russia (DR) and marginal revenue curves in France (MRF) and Russia (MRR). Le Jouet's marginal cost of production (MC), depicted as the grey horizontal line in both graphs, is $12, and the resale of toy trains from Russia to France is prohibited. Assume there are no fixed costs in production, so marginal cost equals average total cost (ATC). PRICE (Dollars per toy train) 40 36 32 28 Total 24 20 16 12 8 4 0 Country France Russia France MR Price (Dollars per toy train) 20 20 2 4 6 8 10 12 14 16 18 20 QUANTITY (Millions of toy trains) N/A O True MC-ATC OF O False N/A (?) Single Price Quantity Sold (Millions of toy…arrow_forward
- 9. International price discrimination Giocattolo is an Italian firm, and it is the only seller of toy cars in Italy and Spain. Suppose that when the price of toy cars increases, Spanish children more readily replace them with toy motorbikes than Italian children. Thus, the demand for toy cars in Spain is more elastic than in Italy. The following graphs show the demand curves for toy cars in Italy (D₁) and Spain (Ds) and marginal revenue curves in Italy (MR₁) and Spain (MRs). Giocattolo's marginal cost of production (MC), depicted as the grey horizontal line in both graphs, is $12, and the resale of toy cars from Spain to Italy is prohibited. Assume there are no fixed costs in production, so marginal cost equals average total cost (ATC). PRICE (Dollars per toy car) 40 36 32 Total 28 0 Country Italy Spain 2 MR. 4 6 8 10 12 14 16 QUANTITY (Millions of toy cars) Price (Dollars per toy car) 20 20 Italy N/A O True MC ATC O False D₁ N/A 20 Single Price Quantity Sold (Millions of toy cars) (?)…arrow_forwardTwo shoe stores located in the same shopping center have big sales: 20% off on everything in the store. After the sale, Store 1 finds that its total revenue has decreased by 10%, while Store 2 finds that total revenue has increased by 30%. What are the differences in elasticities for the 2 firms? Explain your reasoning.arrow_forwardS&S Manufacturing Co. supplies automotive parts in three outlets in Selangor. The inverse demand equations faced by each outlet are as follows: Outlet 1: P = 150 – 2.50 Q1 Outlet 2: P = 200 – 8.40 Q2 Outlet 3: P = 450 – 0.75 Q3 a. If the firm charges RM100 per unit, determine the quantity demanded by each outlet. b. Given the price, compute the own price elasticity for each outlet and identify which outlet is the most responsive to price change. Why? c. If S&S Manufacturing Co. plans to increase the price by 10 percent, do you think the Company is making a right decision? Explain your answer.arrow_forward
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