Managerial Economics & Business Strategy (Mcgraw-hill Series Economics)
9th Edition
ISBN: 9781259290619
Author: Michael Baye, Jeff Prince
Publisher: McGraw-Hill Education
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Question
Chapter 9, Problem 21PAA
To determine
The range over which there will be changes in the marginal cost having no effect on CD's profit maximizing level of output is to be explained.
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PC Connection and CDW are two online retailers that compete in an Internet market for digital cameras. While the products they sell are similar, the firms attempt to differentiate themselves through their service policies. Over the last couple of months, PC Connection has matched CDW’s price cuts but has not matched its price increases. Suppose that when PC Connection matches CDW’s price changes, the inverse demand curve for CDW’s cameras is given by P = 1,500 − 3Q. When it does not match price changes, CDW’s inverse demand curve is P = 900 − 0.50Q. Based on this information, determine CDW’s inverse demand and marginal revenue functions over the last couple of months. Over what range will changes in marginal cost have no effect on CDW’s profit-maximizing level of output?
Kafue Water and Sewerage Company and Lusaka Water and Sewerage Company are duopolistic firms operating under the Cournot model. The two companies are both supplying Water to Chilanga District whose total demand is given by a linear demand function Q = 720 – 2P = 3q1 + 3q2, where q1 represents water output by Kafue Water, and q2 is water output by Lusaka Water and Sewerage Company. Assume that:
Each firm has no production costs
Each firm has to decide how much water to supply to the market
Given the above information, determine
The profit-maximizing output, price, and level of profit for the two companies.
The individual level of outputs q1 and q2, as well as the revenue for which the two companies are maximizing profits.
Interpret your results in (i) and (ii)
You are the manager of a golf course. For simplicity assume that you only have two potential customers – a high demand customer whose inverse demand for golf services is given by P = 10 – 0.5Q and a low demand customer whose inverse demand for golf services is given by P = 8 – 0.5Q. Suppose the marginal cost to the golf course of each round of golf is zero.Suppose you have to charge both players the same two-part pricing strategy. Which of the following pricing strategies will yield the highest profit for you?
A.
Charge a fixed fee of €100 and a per unit fee of zero
B.
Charge a fixed fee of €64 and a per unit fee of zero
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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
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