Suppose that BMW can produce any quantity of cars at a constant marginal cost equal to $20,000 and a fixed cost of $10 billion. You are asked to advise the CEO as to what prices and quantities BMW should set for sales in Europe and in the United States. The demand for BMWs in the U.S. is given by Qu = 1, 000, 000 – 20P. The demand for BMWs in Europe is given by QE E = 4,000,000 - 100PE. All prices and costs are in U.S. dollars. Assume that the company can prevent resale between the two markets.

Suppose that BMW can produce any quantity of cars at a constant marginal cost equal to $20,000 and a fixed cost of $10 billion. You are asked to advise the CEO as to what prices and quantities BMW should set for sales in Europe and in the United States. The demand for BMWs in the U.S. is given by Qu = 1, 000, 000 – 20P. The demand for BMWs in Europe is given by QE E = 4,000,000 - 100PE. All prices and costs are in U.S. dollars. Assume that the company can prevent resale between the two markets.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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