Market Structures and Pricing Decisions Applied Problems

Problem 1: Robert’s New Way Vacuum Cleaner Gang is a newly established weak duty that produces vacuum cleaners and belongs to a monopolistically competitive dispense. Its call-control deflexion control the effect is explicit as Q = 5000 – 25P where Q is the compute of vacuum cleaners per year and P is in dollars. Absorb class processes keep attached that the firm’s absorb part is represented by TC = 1500 + 20Q + 0.02Q2. Show full of your calculations and processes. Describe your counter-argument control each investigation in completion sentences, whenever it is requisite. What are the emolument-maximizing worth and output equalizes? Explain them and compute algebraically control equilibrium P (price) and Q (output). Then, concoct the MC (ultimate absorb), D (demand), and MR (ultimate produce) deflexions graphically and embody the equilibrium subject-matter. How considerable economic emolument do you coercionesee that Robert’s gang conquer coercionm in the coercionemost year? Do you coercionesee this economic emolument equalize to live in after years? Why or why belongable? Problem 2: Greener Grass Gang (GGC) competes with its deep emulate, Better Lawns and Gardens (BLG), in the contribute and inductation of in-ground lawn watering schemes in the rich western environs of a major east-coast city. Latest year, GGC’s worth control the normal lawn scheme was $1,900 compared with BLG’s worth of $2,100. GGC inveterate 9,960 schemes, or encircling 60% of completion sales and BLG inveterate the intermission. (No hesitate multifarious subjoined schemes were inveterate by do-it-yourself homeowners consequently the parts are early advantageous at hardware stores.) GGC has true abundance capacity–it could amply instfull 25,000 schemes annually, as it has full the requisite equipment and can amply rent and retinue inducters. Accordingly, GGC is becaauthentication dilution into the eastern environs, where the homeowners are less rich. In elapsed years, twain GGC and BLG keep inveterate various hundred schemes in the eastern environs not attributable attributablewithstanding generally their sales efforts are inspiration with the retort that the schemes are so valuable. GGC has rentd you to approve a pricing policy control twain the western and eastern suburb dispenses control this hereafter opportunity. You keep estimated brace obvious call-control parts, as follows: Qw =2100 – 6.25Pgw + 3Pbw + 2100Ag – 1500Ab + 0.2Yw control the western dispense and Qe = 36620 – 25Pge + 7Pbe + 1180Ag – 950Ab + 0.085Ye control the eastern dispense, where Q belongs to the compute of units sold; P belongs to worth equalize; A belongs to advertising budgets of the firms (in darlings); Y belongs to middle economical proceeds equalizes of the virtual customers; the subscripts w and e belong to the western and eastern dispenses, respectively; and the subscripts g and b belong to GGC and BLG, respectively. GGC coercionesees to waste $1.5 darling (authentication Ag = 1.5) on advertising this hereafter year and coercionesees BLG to waste $1.2 darling (authentication Ab = 1.2) on advertising. The middle well-acquainted economical proceeds is $60,000 in the western environs and $30,000 in the eastern environs. GGC does belongable coercionesee BLG to diversify its worth from latest year consequently it has already as sorted its luxurious brochures (with the $2,100 worth normal) in twain environs, and its TV interchangeable has already been manufactured. GGC’s absorb composition has been estimated as TVC = 750Q + 0.005Q2, where Q represents uncombined lawn watering schemes. Show full of your calculations and processes. Describe your counter-argument control each ace beneath in completion sentences, whenever it is requisite. Derive the call-control deflexions control GGC’s effect in each dispense. Derive GGC’s ultimate produce (MR) and ultimate absorb (MC) deflexions in each dispense. Show graphically GGC’s call-for, MR, and MC deflexions control each dispense. Derive algebraically the quantities that should be manufactured and sold, and the worths that should be teeming, in each dispense. Compute the worth elasticities of call-control in each dispense and argue these in fitness to the worths to be teeming in each dispense. Add a weak belongablee to GGC address outlining any reservations and qualifications you may keep touching your worth approveations.

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