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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Chapter 5, Problem 19PAA
To determine
To find: The number of labors that must be hired to maximize the profit.
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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)
A.Determine the company’s total profit function. Also,
(i) What are the profit maximizing levels of price and output for the two markets?
(ii) Calculate the marginal revenues in each market.
B.Now consider two cases:
(i) Company is effectively able to price discriminate in thetwo markets. What will be the total profits?
(ii) Suppose the company does not engage in price discrimination. By charging thesameprice in the two markets what are the profit maximizing levels of price,output, and the total profits?…
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)
b. consider two cases:
(i) Company is effectively able to price discriminate in thetwo markets. What will
be the total profits?
(ii) Suppose the company does not engage in price discrimination. By charging thesameprice 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 available to the company.
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)
(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?
(iii) Analyze, with graphs, the two alternative pricing strategies available to the company.
Chapter 5 Solutions
Managerial Economics & Business Strategy (Mcgraw-hill Series Economics)
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