EconomicsThe inverse market demand for Hummers in NYC is p = 120 - 2Q. The cost of producing oneHummer is c= $40. The manufacturer licenses a single dealer to sell Hummers in NYC.4.Therefore, the dealer acts as a monopoly in NYC in this market.The manufacturer sells each Hummer to the dealer for w (wholesale price). In addition, themanufacturer levies a fixed fee of f on the dealership.Consider a two-stage game in which in Stage 1 the Hummer manufacturer sets the per-unit pricecharged to the dealer w, and the fixed fee f. In Stage 2, the dealer determines the amount ofHummers to sell to maximize the dealership's profit.For parts (a) through (d), assume that f = 0.(a)Suppose the unit price the manufacturer charges the dealer w is given (determined in the firststage of the game).Compute the dealer's profit-maximizing sales of Hummers as a function of w.(b)Compute the manufacturer's profit-maximizing price w it charges the dealer for each Hummersold.(c)Compute quantity of Hummers sold by the dealer, and the price p charged to buyers.(d)Compute the profit made by the dealer and the manufacturer.(e)Can you find a price w and a fixed fee f which the manufacturer charges the dealer so that, both,the dealer and the manufacturer earn higher profit compared with the profits you computed inthe previous question?

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4. (a) (b) (c) The inverse market demand for Hummers in NYC is p = 120-2Q. The cost of producing one Hummer is c = $40. The manufacturer licenses a single dealer to sell Hummers in NYC. Therefore, the dealer acts as a monopoly in NYC in this market. The manufacturer sells each Hummer to the dealer for w (wholesale price). In addition, the manufacturer levies a fixed fee off on the dealership. Consider a two-stage game in which in Stage 1 the Hummer manufacturer sets the per-unit price charged to the dealer w, and the fixed fee f. In Stage 2, the dealer determines the amount of Hummers to sell to maximize the dealership's profit. For parts (a) through (d), assume that f = 0. Suppose the unit price the manufacturer charges the dealer w is given (determined in the first stage of the game). Compute the dealer's profit-maximizing sales of Hummers as a function of w. Compute the manufacturer's profit-maximizing price w it charges the dealer for each Hummer sold. Compute quantity of Hummers sold by the dealer, and the price p charged to buyers.

4. (a) (b) (c) The inverse market demand for Hummers in NYC is p = 120-2Q. The cost of producing one Hummer is c = $40. The manufacturer licenses a single dealer to sell Hummers in NYC. Therefore, the dealer acts as a monopoly in NYC in this market. The manufacturer sells each Hummer to the dealer for w (wholesale price). In addition, the manufacturer levies a fixed fee off on the dealership. Consider a two-stage game in which in Stage 1 the Hummer manufacturer sets the per-unit price charged to the dealer w, and the fixed fee f. In Stage 2, the dealer determines the amount of Hummers to sell to maximize the dealership's profit. For parts (a) through (d), assume that f = 0. Suppose the unit price the manufacturer charges the dealer w is given (determined in the first stage of the game). Compute the dealer's profit-maximizing sales of Hummers as a function of w. Compute the manufacturer's profit-maximizing price w it charges the dealer for each Hummer sold. Compute quantity of Hummers sold by the dealer, and the price p charged to buyers.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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