Managerial Economics & Business Strategy (Mcgraw-hill Series Economics)
9th Edition
ISBN: 9781259290619
Author: Michael Baye, Jeff Prince
Publisher: McGraw-Hill Education
expand_more
expand_more
format_list_bulleted
Question
Chapter 9, Problem 14PAA
To determine
To explain: Whether the given situation is the best decision as per one's first instinct.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solutionStudents have asked these similar questions
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 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.
Chapter 9 Solutions
Managerial Economics & Business Strategy (Mcgraw-hill Series Economics)
Ch. 9 - Prob. 1CACQCh. 9 - Prob. 2CACQCh. 9 - Prob. 3CACQCh. 9 - Prob. 4CACQCh. 9 - Prob. 5CACQCh. 9 - Prob. 6CACQCh. 9 - Prob. 7CACQCh. 9 - Prob. 8CACQCh. 9 - Prob. 9CACQCh. 9 - Prob. 10CACQ
Ch. 9 - Prob. 11PAACh. 9 - Prob. 12PAACh. 9 - Prob. 13PAACh. 9 - Prob. 14PAACh. 9 - The opening statement on the website of the...Ch. 9 - Prob. 16PAACh. 9 - Prob. 17PAACh. 9 - Prob. 18PAACh. 9 - Prob. 19PAACh. 9 - Prob. 20PAACh. 9 - Prob. 21PAACh. 9 - Prob. 22PAACh. 9 - Prob. 23PAACh. 9 - Prob. 24PAA
Knowledge Booster
Similar questions
- 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)…arrow_forwardExplain how beliefs and strategic interaction shape optimal decisions in oligopoly environments. You are the manager of the only firm worldwide that specializes in exporting fish products to Japan. Your firm competes against a handful of Japanese firms that enjoy a significant first-mover advantage. Recently, one of your Japanese customers has called to inform you that the Japanese legislature is considering imposing a quota that would reduce the number of pounds of fish products you are permitted to ship to Japan each year. Your first instinct is to call the trade representative of your country to lobby against the import quota. Is following through with your first instinct necessarily the best decision? Why or why not?arrow_forwardCountry X and Country Z specialize in the production of agricultural equipment and wheat respectively. Country X exports agricultural equipment to Country Z, which in turn exports wheat to Country X. According to the theory of comparative advantage, this mutually beneficial trade relationship is an example of Question 40 options: the significance of trade barriers. a positive-sum game. a first-mover advantage. the advantages of mercantilism. a zero-sum game.arrow_forward
- 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…arrow_forwardYou are the manager of BlackSpot Computers, which competes directly with Condensed Computers to sell high-powered 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 = 5,900 − 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…arrow_forwardTwo cigarette manufacturers repeatedly play the following simultaneous-move billboard advertising game. If both advertise, each earns profits of $0 million. If neither advertises, each earns profits of $10 million. If one advertises and the other does not, the firm that advertises earns $20 million and the other firm loses $1 million. If there is a 10 percent chance that the government will ban cigarette sales in any given year, can the firms “collude” by agreeing not to advertise?arrow_forward
- 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?arrow_forwardThere are two firms that are considering entering a new market, and must make their decision without knowing what the other firm has done. Unfortunately the market is only big enough to support one of the two firms. If both firms enter the market then they will each make a loss of £20 million. If only one firm enters the market, that firm will earn a profit of £80 million, and the other firm will just break even. If both firms do not enter the market, then they will just break even as well Construct the normal form for this game. Construct the extensive form for this game.arrow_forwardThere are two firms that are considering entering a new market, and must make their decision without knowing what the other firm has done. Unfortunately the market is only big enough to support one of the two firms. If both firms enter the market then they will each make a loss of £20 million. If only one firm enters the market, that firm will earn a profit of £80 million, and the other firm will just break even. If both firms do not enter the market, then they will just break even as well What outcomes, if any, are Nash equilibria? (explain the decision step by step) Based on a maximin strategy, what will be the outcome? (explain the decision step by step)arrow_forward
- There are two firms that are considering entering a new market, and must make their decision without knowing what the other firm has done. Unfortunately the market is only big enough to support one of the two firms. If both firms enter the market then they will each make a loss of £20 million. If only one firm enters the market, that firm will earn a profit of £80 million, and the other firm will just break even. If both firms do not enter the market, then they will just break even as well Construct the normal form for this game Construct the extensive form for this game What outcomes, if any, are Nash equilibria? (explain the decision step by step) Based on a maximin strategy, what will be the outcome? (explain the decision step by step)arrow_forwardThere are two firms that are considering entering a new market, and must make their decision without knowing what the other firm has done. Unfortunately the market is only big enough to support one of the two firms. If both firms enter the market then they will each make a loss of £20 million. If only one firm enters the market, that firm will earn a profit of £80 million, and the other firm will just break even. If both firms do not enter the market, then they will just break even as well Construct the extensive form for this gamearrow_forwardThere are two firms that are considering entering a new market, and must make their decision without knowing what the other firm has done. Unfortunately the market is only big enough to support one of the two firms. If both firms enter the market then they will each make a loss of £20 million. If only one firm enters the market, that firm will earn a profit of £80 million, and the other firm will just break even. If both firms do not enter the market, then they will just break even as well Construct the normal form for this game?arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- Principles of Economics (12th Edition)EconomicsISBN:9780134078779Author:Karl E. Case, Ray C. Fair, Sharon E. OsterPublisher:PEARSONEngineering Economy (17th Edition)EconomicsISBN:9780134870069Author:William G. Sullivan, Elin M. Wicks, C. Patrick KoellingPublisher:PEARSON
- Principles of Economics (MindTap Course List)EconomicsISBN:9781305585126Author:N. Gregory MankiwPublisher:Cengage LearningManagerial Economics: A Problem Solving ApproachEconomicsISBN:9781337106665Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike ShorPublisher:Cengage LearningManagerial Economics & Business Strategy (Mcgraw-...EconomicsISBN:9781259290619Author:Michael Baye, Jeff PrincePublisher:McGraw-Hill Education
Principles of Economics (12th Edition)
Economics
ISBN:9780134078779
Author:Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:9780134870069
Author:William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:PEARSON
Principles of Economics (MindTap Course List)
Economics
ISBN:9781305585126
Author:N. Gregory Mankiw
Publisher:Cengage Learning
Managerial Economics: A Problem Solving Approach
Economics
ISBN:9781337106665
Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-...
Economics
ISBN:9781259290619
Author:Michael Baye, Jeff Prince
Publisher:McGraw-Hill Education