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- Pricing Strategies for Firms with Market Power-End of Chapter Problem Elario's inverse demand for cupcakes is And Elario's marginal and average cost is a constant $0.50. Suppose Elario decides to sell cupcakes only in packages of 20. a. How much would customers be willing to pay to obtain a 20-pack of Elario's cupcakes? Price for 20-pack = $ b. How much profit will Elario earn from each customer? Profit per customer: $ c. Profit under this scheme is profit earned by Elario in part d of problem 16.Offer Bud Light Don't Offer New Ads New Ads Offer New Ads B: $100 B: $50 M: $100 M: $200 Miller Lite Don't Offer New Ads B: $200 M: $50 B: $120 M: $120 Refer to Table 14.2.4. The marketers of Budweiser Light beer and Miller Lite beer must decide whether or not to offer new advertising campaigns promoting their products. The payoffs in the table are the economic profit made by Bud and Miller. Which one of the following observations is correct? This game has no Nash equilibrium. Bud has a dominant strategy but Miller does not. This game has no dominant strategies. Bud and Miller each have a dominant strategy. Miller has a dominant strategy but Bud does not.250 225 Revenue Lost 200 175 150 Revenue Gained 125 Demand 100 75 50 25 3 4 7 8 9. 10 QUANTITY (Fire engines) Gilberto increase production from 7 to 8 fire engines because the dominates in this scenario. True or False: If Gilberto's Fire Engines were a competitive firm instead and $100,000 were the market price for an engine, decreasing its price from $100,000 to $50,000 would result in the same change in the production quantity and, thus, total revenue. O True O False acer Σ 2. 1. PRICE (Thousands of dollars per fire engine)
- Suppose than an oligopolist is charging $20 per unit of output and selling 28 units each day. What is its daily total revenue? $ Also suppose that previously it had lowered its price from $20 to $18, rivals matched the price cut, and the firm's sales increased from 28 to 29 units. It also previously raised its price from $20 to $29, rivals ignored the price hike, and the firm's daily total revenue came in at $550. Which of the following is most logical to conclude? The firm's demand curve is (Click to select) < Prev Ne 28 of 50As the new general manager of the Grand Palladium Jamaica luxury all-inclusive resort, youare assessing your pricing policies. Currently, the price of a weekend stay is $2,000 perguest. You estimate the marginal cost of serving a guest at $1,600, and while yourpredecessor unfortunately did not leave you data from the pricing experiments and testmarketing she performed, you do know that such experiments were done, and that yourpredecessor was competent.a. What is your best estimate of the elasticity of demand for a weekend stay at the GrandPalladium?b. Your learned that at the current price, the resort is only 80% full on the weekends.Remembering the sense of belonging that you experienced in a crowded subway duringthe rush hour, you contemplate lowering the price so the resort is completely full. What isyour back-of-the-envelope calculation for how much you need to lower the price?c. After some thought you cooled to the idea of full occupancy. Instead, you focused yourenergy and…Industrlal Economics A market is characterised by an inverse demand curve p 6- 20 where Qis total quantity. Two firms, A and 8, are competing à la Cournot and TCA(ga) = 2qaand TCe(ge) = q Firms profts are equal to: o a) A = and a = (b) = and ন = O (o T = and T- O () - 1 and i - 4 Successivo
- Q5. Figure 18-9 shows how price is determined for express lanes in a value pricing (HOT lanes) policy. Vo represents Trip cost ($) Co Toll Toll Vo a Demand: low Trip cost the maximum amount of traffic volume that is possible without congestion the minimum amount of traffic volume that is possible without congestion O the maximum amount of traffic volume that would be willing to pay a toll O the minimum toll cost for the most congested periods Demand: high Vehicles2. McDonalds (m) and Burger King (b) compete in hamburger market by selling imperfect substitutes. The demand equations are: Qm - 230 - 2pm + pb Qb= 230 - 2pb + Pm Assume that marginal cost and average cost is 5 for both firms. a) From the equations, how can you tell these goods are substitutes? b) Suppose the fims compete by simultaneously choosing price. Find the best response finction of each fim as a function of the other firm's price. c) Compute the equilibrium price and quantity for each fim.DuopolyMarket for mechanical pencils can be described by the following demand schedule:Price | Number of pencils demanded$6 | 80$5 | 200$4 | 320$3 | 440$2 | 560$1 | 680$0 | 800The fixed cost is $340, while the variable cost is $0.50.d) If there were two firms on the market and they agreed to cooperate, how much would eachfirm need to produce? Follow the procedure outlined in the lecture and show that the otherfirm would prefer to deviate from the agreement.e) When the firms deviate from the agreement, there is a new optimal level of output. Showwhether the firms have an incentive to deviate from that level?f) If there were two firms on the market, what would be the price and the quantity of pencilstraded if the firms couldn’t cooperate?
- Consider a market with two firms. Each firm is located at one end of a line with lenght one. There is a mass one of consumers. The location of each consumer is given by 0 < x < 1 which is uniformly distributed (with density 1). Firms have no cost of production and set price simultaneously. a) Derive the demand for each firm by identifying the location of the indifferent con- sumer for each price pair. Assume that all consumers know about both products. b) Write down the profit functions and calculate the Nash equilibrium prices for both firms. c) Assume that consumers only know the product if they have received and ad. Suppose that ads are not targeted and each firm reaches any consumer with probability 0.5 with her ad. Calculate the size of the different consumer segments. Determine the resulting demand and the new Nash equilibirum prices of the firms. d) Suppose that the ads are costless. When do the firms make larger profits? With fully informed consuemers b) or with imperfect…Which of the following statements is false? O The monopolistic competitor is a price searcher. O The monopolistic competitor produces an output at which price is greater than marginal cost. O The demand curve facing a monopolistic competitor is less elastic than the demand curve facing a monopolist. O There are many substitutes in a monopolistic competitive industry.Consider the Cournot duopoly with linear demand function ? = 2000 − 2Q, where P is the price and Q = q1 + q2 is the total supply. Firm 1 and firm 2 has constant marginal cost of 600. Just answer the E, F and G, thank you bartleby! a. If firm compete in price, draw in detail the best response of each firm.b. Determine and explain the Bertrand equilibrium.c. What is the equilibrium quantity and how much profit for each firm?d. Explain the Bertrand Paradox in (c)!e. If firm 1 has capacity of production 450 and firm 2 has capacity of 200. Determine the Bertrand equilibrium.f. What is the equilibrium quantity, and how much profit for each firm?g. Is there any paradox in (f)?