EBK INTERMEDIATE MICROECONOMICS AND ITS
12th Edition
ISBN: 9781305176386
Author: Snyder
Publisher: YUZU
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Chapter 12.5, Problem 1MQ
To determine
decreasing in B’s entry cost would affect A’s entry deterring strategy
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Suppose that a manufacturer produces two brands of a product, brand 1 and brand 2. Suppose the demand for brand 1 is x = 88 – p, thousand units and the demand for brand 2 is y = 98 – p,
%D
thousand units, where p, and p, are prices in dollars. If the joint cost function is C = xy, in thousands of dollars, how many of each brand should be produced to maximize profit?
brand 1
thousand units
brand 2
thousand units
What is the maximum profit?
thousand dollars
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Road Runner Co is a Pakistani manufacturer making Bicycles. It exports to two markets,Bangladesh and Sri Lanka. Demand for Bicycles in thesetwo markets is given by the following Functions:
Bangladesh Q1 = 12 – P1
Sri Lanka Q2 = 8 – P2
Where Q1 and Q2 are respective quantities sold (in thousands) andP1 and P2 are the respective prices (in Pak. Rupees per unit) in the two markets. Total cost function is
C = 5 + 2 (Q1+ Q2)
Now consider two cases
(i) Company is effectively able to price discriminate in the two markets. What will be the total profits?
(ii) Suppose the company does not engage in price discrimination. By charging the same price in the two markets what are the profit maximizing levels of price, output, and the total profits?
c. Analyze, with graphs, the two alternative pricing strategies…
Suppose the situation changes. JointJuice has its plant in Portland Oregon. The local government passes a new tax on businesses that raises JointJuice’s fixed cost by $25 per period. The cost function now becomes:
C(q) = 300 + 6q + 0.1q^2
All the other firms in the market are in other states/cities that are not subject to the laws or taxes of Portland.
Calculate JointJuice’s optimal output level and profits if the market price for the product stays the same as for part a. What will the firm do in the long run?
Is it reasonable to assume the market price prevailing today will remain the same in the long run? If so why? If not, why not? How about the number of firms in the market?
Chapter 12 Solutions
EBK INTERMEDIATE MICROECONOMICS AND ITS
Ch. 12.2 - Prob. 1TTACh. 12.2 - Prob. 2TTACh. 12.2 - Prob. 1MQCh. 12.2 - Prob. 2MQCh. 12.2 - Prob. 1.1TTACh. 12.2 - Prob. 2.1TTACh. 12.2 - Prob. 1.1MQCh. 12.3 - Prob. 1MQCh. 12.3 - Prob. 2MQCh. 12.3 - Prob. 1TTA
Ch. 12.3 - Prob. 2TTACh. 12.3 - Prob. 1.1MQCh. 12.3 - Prob. 2.1MQCh. 12.3 - Prob. 1.1TTACh. 12.3 - Prob. 2.1TTACh. 12.4 - Prob. 1TTACh. 12.4 - Prob. 2TTACh. 12.5 - Prob. 1MQCh. 12.5 - Prob. 2MQCh. 12.5 - Prob. 1TTACh. 12.5 - Prob. 2TTACh. 12.6 - Prob. 1MQCh. 12.6 - Prob. 2MQCh. 12 - Prob. 1RQCh. 12 - Prob. 2RQCh. 12 - Prob. 3RQCh. 12 - Prob. 4RQCh. 12 - Prob. 5RQCh. 12 - Prob. 6RQCh. 12 - Prob. 7RQCh. 12 - Prob. 8RQCh. 12 - Prob. 9RQCh. 12 - Prob. 10RQCh. 12 - Prob. 12.1PCh. 12 - Prob. 12.2PCh. 12 - Prob. 12.3PCh. 12 - Prob. 12.4PCh. 12 - Prob. 12.5PCh. 12 - Prob. 12.6PCh. 12 - Prob. 12.7PCh. 12 - Prob. 12.8PCh. 12 - Prob. 12.9PCh. 12 - Prob. 12.10P
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