4. Suppose a manufacturer and its retailer face the problem of double marginalization described in my notes, Section 11.1. If the manufacturer sets the wholesale price equal to its marginal cost c and in addition, requires the retailer to pay a fraction a (between 0 and 1) of its profit. 4.ә Write down the retailer's profit maximization problem. Will this practice solve the double marginalization problem? (That is, will this practice maximize their joint profit?) 4.E Suppose the retailer is required to pay a fraction of a of its sales (i.e., total revenue). Write down the retailer's profit maximization problem. Will this practice solve the double marginalization problem?

4. Suppose a manufacturer and its retailer face the problem of double marginalization described in my notes, Section 11.1. If the manufacturer sets the wholesale price equal to its marginal cost c and in addition, requires the retailer to pay a fraction a (between 0 and 1) of its profit. 4.ә Write down the retailer's profit maximization problem. Will this practice solve the double marginalization problem? (That is, will this practice maximize their joint profit?) 4.E Suppose the retailer is required to pay a fraction of a of its sales (i.e., total revenue). Write down the retailer's profit maximization problem. Will this practice solve the double marginalization problem?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Similar questions

4. Firm A and firm B must decide whether to sell product X at a sales or a regular price. If both firms sell the product at a sales price, both firms earn a profit of 5. If both firms sell the product at the regular price, each firm earns a profit of 20. If firm B charges the regular price while firm A charges the sales price, firm A earns a profit of 60 while firm B has a loss of 15. If firm A charges the regular price while firm B charges a sales price, firm B earns a profit of 60 while firm A has a loss of 15. (a) Use the information to construct a payoff matrix for firms A and B. (b) Does firm A have a dominant strategy? (c) Does firm B have a dominant strategy? (d) What is the Nash Equilibrium for this game? Explain your answers.
1 . Profit maximization and loss minimization BYOB is a monopolist in beer production and distribution in the imaginary economy of Hopsville. Suppose that BYOB cannot price discriminate; that is, it sells its beer at the same price per can to all customers. The following graph shows the marginal cost (MC), marginal revenue (MR), average total cost (ATC), and demand (D) for beer in this market. PLEASE HELP ME
Because this market is monopolistically competitive, you can tell that it is in long-run equilibrium by the fact that at the optimal quantity for each firm. Further, the quantity the firm produces in long-run equilibrium is the efficient scale. True or False: This indicates that there is excess capacity in the market for jackets. O True False Monopolistically competitive markets may be socially inefficient due to the presence of too many or too few firms. The presence of the externality implies that there is too much entry of new firms in the market.
5. Monopoly outcome versus competition outcome Consider the daily market for hot dogs in a small city. Suppose that this market is in long-run competitive equilibrium with many hot dog stands in the city, each one selling the same kind of hot dogs. Therefore, each vendor is a price taker and possesses no market power. The following graph shows the demand (D) and supply (S = MC) curves in the market for hot dogs.
M7
.
7. Suppose you are employed at a monopolistic company as a research (pricing) economist and you are deriving the behavior of two markets based on demand curves given by: D1(P1) = 50 – P1 D2(P2) = 50 – 2p2 Assume that the marginal cost is constant at $8 a unit. (a) If it can price discriminate, what price should it charge in each market in order to maximize profits? (b) If it can't price discriminate, what price should it charge?
2
4. Your firm produces a computer software called "Model It", which is sold to other businesses. Its demand has been estimated to be: QM = 550- 4PM +1.5PS - 2.SI, where, QM denotes units sold of "Model It" software, PM denotes "Model It's" price, Ps denotes the price of a best-selling competitor, and I is the average income of its consumers. a. Currently, PM = $110, Ps= $152, and I = 60. What is the estimated quantity demanded (QM) for "Model It" software? b. What is the change in QM that results from a one unit ($1) change in the PM? C. Holding the values Ps= $152 and I = 60 equal, state the demand function for "Model It" in the format QM = ao + a₁PM and its demand curve (inverse demand function) PM = a - bQM. d. Assume that the price of the competitor's product (Ps) changes from $152 to $172 and that I is still $60, state the new demand function for "Model It" (the format should be QM = αo + α1PM) and its (inverse) demand curve (PM= a - bQM).
2. "The competition commission investigated the high data prices in South Africa in 2017. The report, which was presented two years later, found that the data services market is "highly concentrated" with a duopoly of the leading cell phone operators - MTN and Vodacom".Based on the paragraph given above, which of the statements is CORRECT?A. Highly concentrated market benefits consumers as they have many, many choices available to them.B. Highly concentrated market restricts consumer welfareC. Highly concentrated market is an excellent reason for government to reduce regulationD. Highly concentrated market increases consumer welfare
8. Is bundling profitable? Suppose that Ana is the owner of the only nonmotorized water sports rental shop on a small lake in New Hampshire. At Ana's shop, customers can rent a variety of items such as canoes, paddle boats, tubes, and windsurfers. Assume that the marginal cost of renting out any of these items is $2 per item. Moreover, there are only two types of customers-college students and retired people-and there are equal numbers of each type of customer. The following table shows the willingness to pay of both customer types for rowboats and kayaks. Item Rowboats Kayaks Willingness to Pay (Dollars) College Students 15 3 (Dollars) Retired People 25 5 If Ana rents out rowboats and kayaks separately, the best she can do is to charge $25 for a rowboat rental and these prices, her total profit is $30 from a market consisting of one of each type of customer. Given the valuations in the previous table, it valuations of both consumer types are $5 for a kayak rental. At Now, suppose that…
. Do you consider yourself a member of any brand communities (formal or informal)? If so, what effect do these groups have on your purchasing behavior?