5) Suppose the number of users (i.e. total quantity demanded) for a great new online meeting space (GNOMS) is: n = 900 – p + yn° where y e (0,1), nº is the expected network size, p is the price. a) Assume y = 0.5 and the users accurately anticipate n° so that n = n°, and the marginal cost per user is 0. What is the profit maximising price? ( b) Suppose GNOMS have an investment opportunity to acquire a start-up that can increase the parameter y from 0.5 to 0.9. What is the maximum amount GNOMS should be willing to pay for this acquisition? (
5) Suppose the number of users (i.e. total quantity demanded) for a great new online meeting space (GNOMS) is: n = 900 – p + yn° where y e (0,1), nº is the expected network size, p is the price. a) Assume y = 0.5 and the users accurately anticipate n° so that n = n°, and the marginal cost per user is 0. What is the profit maximising price? ( b) Suppose GNOMS have an investment opportunity to acquire a start-up that can increase the parameter y from 0.5 to 0.9. What is the maximum amount GNOMS should be willing to pay for this acquisition? (
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Question
![5) Suppose the number of users (i.e. total quantity demanded) for a great new online meeting space
(GNOMS) is:
n = 900 – p + ynº where y e (0,1), nº is the expected network size, p is the price.
a) Assume y = 0.5 and the users accurately anticipate nº so that n = n°, and the marginal cost per
user is 0. What is the profit maximising price? (
b) Suppose GNOMS have an investment opportunity to acquire a start-up that can increase the
parameter y from 0.5 to 0.9. What is the maximum amount GNOMS should be willing to pay
for this acquisition? (1](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F40506f6b-fe40-4e9d-bf53-ea1b2893a62d%2Ffb5d2312-8ea9-4d8e-922b-4a9b9b2cff6b%2Ficq21lt_processed.jpeg&w=3840&q=75)
Transcribed Image Text:5) Suppose the number of users (i.e. total quantity demanded) for a great new online meeting space
(GNOMS) is:
n = 900 – p + ynº where y e (0,1), nº is the expected network size, p is the price.
a) Assume y = 0.5 and the users accurately anticipate nº so that n = n°, and the marginal cost per
user is 0. What is the profit maximising price? (
b) Suppose GNOMS have an investment opportunity to acquire a start-up that can increase the
parameter y from 0.5 to 0.9. What is the maximum amount GNOMS should be willing to pay
for this acquisition? (1
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