1) A mainframe computer retailer is expanding by offering retailers in cities throughout the Midwest. Based upon recent operating experience, each mainframe sold will result in $10,000 in variable wholesale, service, and warranty costs. Also, each franchise will incur $500,000 per year in fixed over head costs. The retailer expects a typical franchise to face the following demand curve: P = 30,000 - Q Where P is the price in dollars and Q is the number of mainframes sold. What is the profit function for each franchise? п

1) A mainframe computer retailer is expanding by offering retailers in cities throughout the Midwest. Based upon recent operating experience, each mainframe sold will result in $10,000 in variable wholesale, service, and warranty costs. Also, each franchise will incur $500,000 per year in fixed over head costs. The retailer expects a typical franchise to face the following demand curve: P = 30,000 - Q Where P is the price in dollars and Q is the number of mainframes sold. What is the profit function for each franchise? п

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter14: Pricing Techniques And Analysis

Section: Chapter Questions

Problem 8E

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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…
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…