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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Question
Chapter 12, Problem 6E
a)
To determine
To describe:
Indication graphically and verbally of segmented
b)
To determine
To describe:
Marginal revenue function for Chillman,
c)
To determine
To describe:
Marginal cost and profit maximizing price and quantity,
d)
To determine
To describe:
Impact of increase in cost on profit maximizing output
e)
To determine
To describe:
New cost functions and profit maximizing output
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Q1: Analytical part - 8%
Best Orange Juice Company is located in Oman. The cost function for total orange juice
production (x) is given by C(q) = 0.25x2. Their orange juice is demanded only in Muscat (Muscat
demand is Xm- 100-2Pm) and Salalah (Salalah demand is X 100-4Ps). Therefore, the total
demand is x-xm+ Xs. If the company can control the quantities supplied to each market, how many
should it sell in each location to maximize total profits? What price would it charge in each
location?
Answer:
Road Runner Co is a Pakistani manufacturer making Bicycles. It exports to two markets,Bangladesh and Sri Lanka. Demand for Bicycles in thesetwo markets is given by the following Functions:
Bangladesh Q1 = 12 – P1
Sri Lanka Q2 = 8 – P2
Where Q1 and Q2 are respective quantities sold (in thousands) andP1 and P2 are the respective prices (in Pak. Rupees per unit) in the two markets. Total cost function is
C = 5 + 2 (Q1+ Q2)
A.Determine the company’s total profit function. Also,
(i) What are the profit maximizing levels of price and output for the two markets?
(ii) Calculate the marginal revenues in each market.
B.Now consider two cases:
(i) Company is effectively able to price discriminate in thetwo markets. What will be the total profits?
(ii) Suppose the company does not engage in price discrimination. By charging thesameprice in the two markets what are the profit maximizing levels of price,output, and the total profits?…
Chapter 12 Solutions
Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
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