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: Cengage Learning
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Chapter 1, Problem 2.4CE
To determine
To find: The reason for the rise in shareholders’ value when investing in negative
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AVX makes and sells a single product Z. The selling price and marginal revenue equations for product Z are as follows:
Selling price- 230o-0.025x
Marginal revenue - 230-0.05x
The variable costs are E40 per unit and the fixed costs are £135,000.
If the selling price was set to maximise revenue, calculate the resulting profit.
Please type your answer (including your workings) in the box below.
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You are given the following data for your firm, which sells a patented super-absorbent cleaning towel for use in large retail complexes (called “One Wring to Rule the Mall” ©).
Q
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$208
$4,062.50
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$201
$5,180.00
30
$194
$6,157.50
40
$187
$7,100.00
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$8,112.50
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$166
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Determine equations for P=f(Q), MR=f(Q), ATC=f(Q, Q2), AVC=f(Q, Q2), MC=f(Q, Q2). Recall that your marginal equations should be derivatives of your totals!
Determine the profit-maximizing price and quantity. (Since MC is in terms of Q2, solving with calculus and algebra can be messy unless you know the quadratic formula. Your table should give an exact answer.)
How much total profit would your firm earn if you set P and Q according to part b?
Describe the competitiveness of the market by calculating the…
Question
An incumbent firm Pilly has a product that works well but has the possibility of causing
side-effects to users. Both Pilly and an upstart firm Smirck are having the opportunity to
develop a new product without the side effects. The following table shows the expected
net return (after considering R&D costs, probability of success in product development,
and future profits) for each firm under different scenarios.
Smirck Invest
Smirck Not Invest
Pilly: $2.4 m
Smirck: -$0.1 m.
Pilly Invest
Pilly: $4.9 m
Smirck: $0
Pilly Not Invest
Pilly: $3 m
Smirck: $0.4 m
Pilly: $5 m
Smirck: $0
Assume that the two firms simultaneously choose whether to invest or not. What is the
Nash Equilibrium of this game (that is, the action choices of the two firms in the Nash
Equilibrium)? Would your answer be different if Pilly is the first mover and commits to
its choice before Smirck makes its response (that is, a sequential-move game)?
Equilibrium in the simultaneous-move game (No need for…
Chapter 1 Solutions
Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
Ch. 1 - One of the approaches for the Southern Company to...Ch. 1 - Prob. 2ECh. 1 - Prob. 3ECh. 1 - In the Southern Company Managerial Challenge,...Ch. 1 - Prob. 5ECh. 1 - Prob. 6ECh. 1 - Prob. 7ECh. 1 - Prob. 8ECh. 1 - Prob. 1.1CECh. 1 - Prob. 1.2CE
Ch. 1 - Prob. 1.3CECh. 1 - Prob. 1.4CECh. 1 - Prob. 1.5CECh. 1 - Prob. 1.6CECh. 1 - Prob. 1.7CECh. 1 - Prob. 1.8CECh. 1 - Prob. 1.9CECh. 1 - As a value-maximizing aluminum company, should...Ch. 1 - Prob. 2.2CECh. 1 - Prob. 2.3CECh. 1 - Prob. 2.4CECh. 1 - Energy entrepreneur T. Boone Pickens has proposed...
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