Microeconomics
Microeconomics
11th Edition
ISBN: 9781260507140
Author: David C. Colander
Publisher: McGraw Hill Education
Question
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Chapter 15, Problem 11QE

(a)

To determine

Find the relevant market. 

(b)

To determine

The argument if an individual is an economist who is working for Hasbro.

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Microsoft sells two types of office software, a word processor it calls Word, and a spreadsheet it calls Excel. Both can be produced at zero marginal cost. There are two types of consumers for these products, who exist in roughly equal proportions in the population: authors, who are willing to pay $120 for Word and $40 for Excel, and economists, who are willing to pay $50 for Word and $150 for Excel. a. Suppose that Microsoft execs decide to sell Word and Excel separately. What price should Microsoft set for Word? What price should Microsoft set for Excel? What will Microsoft's profit be from a representative group of one author and one economist? c. Suppose that Microsoft decides to bundle together Word and Excel in a package called Office, and not offer them individually. What price should Microsoft set for the package? Why? How much profit willI Microsoft generate from a representative group of one author and one economist? d. Does bundling allow Microsoft to generate higher profit…
Verizon can be viewed as a first mover.  Now suppose both ATT and Verizon are considering whether and how to enter a potential market. Market demand is given by the inverse demand function p= 900−q1−q2, where p is the market price margin, q1 is the quantity sold by Verizon and q2 is the quantity sold by ATT. To enter the market, a retailer must build a store. Two types of stores can be built: Small and Large. The Small store requires an investment of $50,000, and it allows the retailer to sell as many as 100 units of the goods at zero marginal cost. Alternatively, they can pay $175,000 to construct a Large store that will allow it to sell any number of units at zero marginal cost. Assume Verizon enters and builds a Large store (i.e. chooses to build a Large store L1 at the first stage.) Calculate Verizon's profit for the following cases:   a.) ATT chooses not to enter N at the second stage after viewing Verizon's choice. b.) ATT chooses to build a Small store S at the second stage…
Verizon can be viewed as a first mover.  Now suppose both ATT and Verizon are considering whether and how to enter a potential market. Market demand is given by the inverse demand function p= 900−q1−q2, where p is the market price margin, q1 is the quantity sold by Verizon and q2 is the quantity sold by ATT. To enter the market, a retailer must build a store. Two types of stores can be built: Small and Large. The Small store requires an investment of $50,000, and it allows the retailer to sell as many as 100 units of the goods at zero marginal cost. Alternatively, they can pay $175,000 to construct a Large store that will allow it to sell any number of units at zero marginal cost. Assume Verizon stays out of the potential market (i.e. chooses not to enter N1 at the first stage, q1= 0).  Calculate Verizon's profit for the following cases:   a.) ATT chooses not to enter N at the second stage after viewing Verizon's choice. b.) ATT chooses to build a Small store S at the second stage…
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