Answered: Compare the three alternative global…

Business

Economics

Compare the three alternative global pricingstrategies.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Marryweather Ltd. is a company that sells machines in the US and the EU. The inverse demand functions for the two markets are given as Pus = 10 – Yus and pgu = 6 - Yev. respectively. The machines for both markets are manufactured in Poland with a fixed % marginal cost of $2 and sold to clients only through its online retail stores (assume the online stores are affiliates of the company and that the profits are directly recorded by Marryweather, Ltd.). Due to its unique patented technology, the company is a monopoly in both markets. 1. Assume, instead of the exclusive territorial agreements, Marryweather, Ltd. has one global retail agreement with its online vendor that sells to both markets. Drawing a diagram (with the proper labels) show the combined market demand and marginal revenue. What is the price? What is the total profit? How many machines does the company sell in each market? 2. If Marryweather, Ltd. could perfectly price discriminate in the combined market from part (b), what…
Pre-mixed concrete is an important input for the construction industry. Concrete cannot be stored or transported over long distances as it begins to set after only a few hours. For this reason, only the three local firms—Aggregate Inc., Big Industries and ConCorp—are in a position to compete in the market. Moreover, the capital and regulatory requirements for constructing a new concrete plant are substantial, creating an effective barrier to entry. Pre-mixed concrete is regarded as a homogeneous good by the construction industry. Inverse demand in the market has been estimated to be,P = 670 − Q/40,where P represents the price of a cubic metre of concrete in dollars, and Q is the total number of cubic metres of concrete supplied into the market on a given day. At present the three firms appear have identical production costs, with each firm facing fixed costs of $400,000 per day and a marginal cost of $190 per cubic metre. Big Industries and ConCorp estimate that the proposed merger…
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Pre-mixed concrete is an important input for the construction industry. Concrete cannot be stored or transported over long distances as it begins to set after only a few hours. For this reason, only the three local firms—Aggregate Inc., Big Industries and ConCorp—are in a position to compete in the market. Moreover, the capital and regulatory requirements for constructing a new concrete plant are substantial, creating an effective barrier to entry. Pre-mixed concrete is regarded as a homogeneous good by the construction industry. Inverse demand in the market has been estimated to be,P = 670 − Q/40,where P represents the price of a cubic metre of concrete in dollars, and Q is the total number of cubic metres of concrete supplied into the market on a given day. At present the three firms appear have identical production costs, with each firm facing fixed costs of $400,000 per day and a marginal cost of $190 per cubic metre. Big Industries and ConCorp estimate that the proposed merger…
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Problem 2: Presently, APlus Transport and Big Movers are the only suppliers of services that haul heavy construction equipment between jobs within the Midwest. No other suppliers have the equipment necessary to perform the service. The market inverse demand for these hauling services is given below. P = 4,030-4Q where P is price per trip and Q is total number of trips per year. For simplicity, also assume that neither firm has fixed costs. From company records, you are given the following variable cost function for each firm: a. C. TVC = 300 TVCB = 80QB b. Calculate the Cournot market equilibrium price-output solutions for each firm including their respective profits. d. Assume these two competitors operate as a two-firm Cournot duopoly. Find the reaction functions for each firm. Suppose Big Movers shuts down operations so that APlus now has a monopoly in this market. What is the price, quantity, and profits for APlus after this change? Summarize the results of your findings over the…
Marryweather Ltd. is a company that sells machines in the US and the EU. The inverse Pus = 10 – Yus and pgu = 6 – YEu, demand functions for the two markets are given as respectively. The machines for both markets are manufactured in Poland with a fixed % marginal cost of $2 and sold to clients only through its online retail stores (assume the online stores are affiliates of the company and that the profits are directly recorded by Marryweather, Ltd.). Due to its unique patented technology, the company is a monopoly in both markets. 1. Assuming Marryweather, Ltd. has an exclusive territorial online retail agreement in each market with its vendors (an online vendor in the US cannot sell to an address in Europe, and vice versa), what would be the profit-maximizing prices and quantities in the US and the EU? What are the profits from each market? 2. Assume, instead of the exclusive territorial agreements, Marryweather, Ltd. has one global retail agreement with its online vendor that sells…