Managerial Economics: A Problem Solving Approach
5th Edition
ISBN: 9781337106665
Author: Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher: Cengage Learning
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Textbook Question
Chapter 17, Problem 10MC
You are considering entry into a market in which there is currently only one producer (incumbent). If you enter, the incumbent can take one of two strategies, price low or price high. If he prices high, then you expect a $60K profit per year. If he prices low, then you expect $20K loss per year. You should enter if
- a. you believe demand is inelastic.
- b. you believe the probability that the incumbent will price low is greater than 0.75.
- c. you believe the probability that the incumbent will price low is less than 0.75.
- d. you believe the market size is growing.
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You are considering entry into a market in which there is currently only one producer (incumbent). If you enter, the incumbent can take one of two strategies, price low or price high. If he prices high, then you expect a $60K profit per year. If he prices low, then you expect a $20K loss per year. You should enter if
Group of answer choices
you believe demand is inelastic.
you believe demand is elastic.
you belive the probability of low price is less than 75%.
you believe the probability of low price is less than 25%. .
the chance is at least 50/50.
A company produces a special new type of TV. The company has fixed costs of $477,000, and it costs $1100 to produce each TV. The company projects that if it charges a price of $2500 for the TV, it will be able to sell 750 TVs. If the company wants to sell 800 Tvs, however, it must lower the price to $2200. Assume a linear demand. What price should the company charge to earn a profit of $953,000?
it would need to charge $_____.
A company produces a special new type of TV. The company has fixed costs of
$451,000,
and it costs
$1000
to produce each TV. The company projects that if it charges a price of
$2600
for the TV, it will be able to sell
800
TVs. If the company wants to sell
850
TVs, however, it must lower the price to
$2300.
Assume a linear demand.
If the company sets the price at
$3800,
how much profit can it earn?
It can expect to earn/lose
$enter your response here.
(Round answer to nearest dollar.)
Chapter 17 Solutions
Managerial Economics: A Problem Solving Approach
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