Apparel manufacturer Nike produces high-end and low-end versions of their running shirts. They estimate that the demands for their products are given by: High-end shirts: P = 130 - 2QH , and Low-end shirts: P = 80 - QL, where Q is measured in 1000 shirts, "H" denotes High-end and "L" denotes Low-end Both types of shirts are produced on the same production line in the same facility, so the marginal cost of producing and selling both types of shirts is constant at $30. Supposing that (i) the two demands are independent and (ii) Nike can produce and market the shirts such that the high- and low-end markets are successfully segmented, what are the profit-maximizing prices Nike would charge for each version? Answer Options: a) by the midpoint rule, PH = $65 and Pl = $40 b) PH = $80 and PL = $55 c) Nike will set price equal to marginal cost for both versions d) PH = $130 and PL = $80
Apparel manufacturer Nike produces high-end and low-end versions of their running shirts. They estimate that the demands for their products are given by:
High-end shirts: P = 130 - 2QH , and
Low-end shirts: P = 80 - QL, where Q is measured in 1000 shirts, "H" denotes High-end and "L" denotes Low-end
Both types of shirts are produced on the same production line in the same facility, so the marginal cost of producing and selling both types of shirts is constant at $30.
Supposing that (i) the two demands are independent and (ii) Nike can produce and market the shirts such that the high- and low-end markets are successfully segmented, what are the profit-maximizing prices Nike would charge for each version?
Answer Options:
a) by the midpoint rule, PH = $65 and Pl = $40
b) PH = $80 and PL = $55
c) Nike will set price equal to marginal cost for both versions
d) PH = $130 and PL = $80
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