ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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Question
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 would be the price and quantity? What is the total profit?
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Transcribed Image Text: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 would be the price and quantity? What is the total profit?
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