problem 1a
DESCRIPTION
Problem 1A. P. 100. 60. 20. 10. 25. Q. Problem 1.B. Problem 1.C. Problem 2. Problem 3.A. AC. P U. P C. Problem 3.B. - PowerPoint PPT PresentationTRANSCRIPT
This slideshow was written by Ken Chapman, but is substantially based on concepts from Modern Industrial Organization by Carlton and Perloff, 4th edition, McGraw-Hill.
Problem 1A
Q
P
2510
20
60
100: 4 20f fS P Q
: 100 4D P Q
100 4 4 20
10
100 4(10) $60
f f
f
Demand Supply
Q Q
Q
P
Problem 1.B
This slideshow was written by Ken Chapman, but is substantially based on concepts from Modern Industrial Organization by Carlton and Perloff, 4th edition, McGraw-Hill.
f
Finding D(P):
100 4 ( ) 25 / 4
Finding S ( ) :
4 20 ( ) / 4 5
Residual Demand:
( ) (25 / 4) ( / 4 5) 30 / 2
60 2
Marginal Revenue:
60 4
f f
d
d
d
P Q Q D P P
P
P Q Q S P P
D P P P P
P Q
MR Q
Problem 1.C
This slideshow was written by Ken Chapman, but is substantially based on concepts from Modern Industrial Organization by Carlton and Perloff, 4th edition, McGraw-Hill.
Profit is maximized where MR=MC:
60 - 4 4 7.5
60 2(7.5) $45
45 / 4 5 $6.25
d d d
f
Q Q Q
P
Q
Problem 2
This slideshow was written by Ken Chapman, but is substantially based on concepts from Modern Industrial Organization by Carlton and Perloff, 4th edition, McGraw-Hill.
A
2A
Maximize (100 2 2 ) 10 where 20 / 2
Or equivalently
Maximize (100 2 2 20 / 2 ) 10 50 ( )
At the profit maximum:
0 50 2 0 25
20 25 / 2 7.5; 100 2(25) 2(7.5) $35
A
A
A B A A B Aq
A A A A A Aq
AA A
A
B
q q q q q q
q q q q q q
dQ Q
dq
q P
Problem 3.A
This slideshow was written by Ken Chapman, but is substantially based on concepts from Modern Industrial Organization by Carlton and Perloff, 4th edition, McGraw-Hill.
1u Lq
n
C Lq
n
AC
PU
PC
1L
Ln
Problem 3.B Since price advertising is likely to increase
the fraction of informed consumers, it may have the effect of eliminating the profitability of the high price alternative.
The 1974 Canadian grocery price experiment suggested that publishing grocery prices each week in the newspapers did tend to bring down average prices.
This slideshow was written by Ken Chapman, but is substantially based on concepts from Modern Industrial Organization by Carlton and Perloff, 4th edition, McGraw-Hill.
Problem 4.A
This slideshow was written by Ken Chapman, but is substantially based on concepts from Modern Industrial Organization by Carlton and Perloff, 4th edition, McGraw-Hill.
q100
10
100
MC
90
Set unit price at MC= $10;
Set the membership fee equal to consumer surplus = (100-10)90/2= $4,050
P
Problem 4.B
This slideshow was written by Ken Chapman, but is substantially based on concepts from Modern Industrial Organization by Carlton and Perloff, 4th edition, McGraw-Hill.
q100
10
100
MC
90
P
200
200
Blank Slide
This slideshow was written by Ken Chapman, but is substantially based on concepts from Modern Industrial Organization by Carlton and Perloff, 4th edition, McGraw-Hill.