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- 5. Foreign direct investment versus licensing Giocattolo is a profit-maximizing firm producing toy cars-a capital-intensive good-which are sold in its home country, Italy, and abroad in Spain. Giocattolo chose foreign production as a method of penetrating the Spanish market and has to decide whether it is more efficient to directly invest in Spain to establish a production subsidiary or to license the technology to a Spanish firm to produce its goods. On the following graph, AVC Spain is the average variable cost curve of a Spanish firm producing toy cars. (This curve represents costs such as labor and materials.) The curve ATC subsidiary represents the total unit costs Giocattolo will face if it establishes a subsidiary in Spain. PER-UNIT COST (Dollars) 10 9 8 2 1 0 0 15 ATC Subsidiary + 105 30 45 60 75 90 PRODUCT (Thousands) 120 AVC Spain + 135 150 ?Continuing with the Table of Certificate Programs, complete the calculations for Total Revenue by determining how many customers will purchase at each of the segments' bundle prices. Online Self Certifications for Social Work License Certification in Online Counseling Segment 1. 1000 Segment 2 Segment 3 Segment 4 4a) 4b) 4c) Customers 4d) 1000 1000 1000 $190 $150 $95 $35 TR Counseling a b с d Certification as a Group Home Counselor $70 $90 $160 $195 TR Group Home e f g h Bundle $260 $240 $255 $230 TR Bundle 4a 4b 4c 4dWhich of the following is NOT a strategy used by a company to “lock-in" customers to ensure demand for its product? O Generating positive network effects. O Pressuring the government to require a license for entry into the market Building goodwill and loyalty among customers. Increasing switching costs.
- The following graph depicts the costs incurred by a Local egg seller, Rahim. Rahim is faced with strong competitors who are selling exactly the same product. Use the graph to answer the following questions- Price/Cost per egg MC 12 ATC MR3 AVC MR2 MR1 Quantity 100 200 300 400 a)lf the market price per egg is 8tk, in order to maximize profit how many eggs does Rahim sell? b)lf the price stays at 8tk, what happens in the long run? choose from the following options. option 1: Rahim stops selling eggs. option 2 : New firms enter into the egg market option 3: all existing sellers suffer from an economic loss. c)lf the price falls down to 3tk price, which of the following option does Rahim have in short run? option1: Temporarily shutting down the business business option 2 : staying in generating no profit option 3: indifferent between staying in and going Out of the market. butAssuming you are the managing director of a firm that produces three goods: A, Band C. The price elasticity of demand for A is 1.2, for B it is 1.00 and for C it is 0.75.It is known that he firm is experiencing serious cash flow problems and you have toincrease total revenue as soon as possible. If you were in a position to set the pricesfor these goods, what would be your pricing strategy for each productSuppose that the restaurant industry in Honolulu is monopolistically competitive and is currently in Stage 2 equilibrium (firms currently make zero profit). The graph below shows the cost curves for a typical restaurant in this industry. (a) Draw a demand curve and an MR that is consistent with this market being in Stage 2 equilibrium. (b) Show the equilibrium price Now suppose an highly-infectious new virus comes to the island, causing demand for restanrant meals to shift in. (c) What would you expect this change in restaurant demand when the number of firms is fixed? Explain. (d) What would you expect the change in demand to do to the number of meals sold, prices and profits of firms in the long run if firms can enter and exit? What happens to the mumber of restaurants?
- 1. Suppose that inverse demand is given by P = 100 − 1/2 Q and each firm’s marginal cost is 10. Assume fixed costs are 0.(a) Solve for equilibrium price and quantity assuming this is a monopoly market. (i.e. Sup-posing there is only one firm, with no threat of entry, find the choice of quantity thatmaximizes profit, and then compute the corresponding market price.)(b) At this price and quantity, what is the monopolist’s profit?(c) What is consumer surplus?(d) What would be the perfectly competitive price, quantity, and consumer surplus?(e) How much is deadweight loss due to monopoly?ASAP 1) Compute the profit-maximizing advertising budget for a monopoly firm using the following pieces of information(a) The company is expected to sell $50 million worth of the product(b) It is estimated that a 1% increase in the advertising budget would increase the quantity sold by 0.04%(c) It is estimated that a 1% increase in the product's price would reduce quantity sold by 0.2%DuopolyMarket for mechanical pencils can be described by the following demand schedule:Price | Number of pencils demanded$6 | 80$5 | 200$4 | 320$3 | 440$2 | 560$1 | 680$0 | 800The fixed cost is $340, while the variable cost is $0.50.d) If there were two firms on the market and they agreed to cooperate, how much would eachfirm need to produce? Follow the procedure outlined in the lecture and show that the otherfirm would prefer to deviate from the agreement.e) When the firms deviate from the agreement, there is a new optimal level of output. Showwhether the firms have an incentive to deviate from that level?f) If there were two firms on the market, what would be the price and the quantity of pencilstraded if the firms couldn’t cooperate?
- 2. McDonalds (m) and Burger King (b) compete in hamburger market by selling imperfect substitutes. The demand equations are: Qm - 230 - 2pm + pb Qb= 230 - 2pb + Pm Assume that marginal cost and average cost is 5 for both firms. a) From the equations, how can you tell these goods are substitutes? b) Suppose the fims compete by simultaneously choosing price. Find the best response finction of each fim as a function of the other firm's price. c) Compute the equilibrium price and quantity for each fim.Question 42: A firm sells two products X and Y in a market with three consumers with the corresponding reservation prices: Consumer Reservation Price for X Reservation Price for Y 1 20 100 60 60 3 100 20 For both X and Y, the marginal cost is 30. (Profit = total revenues - the sum of MCs of all units sold) a. Compute for the the optimal prices and profits if X and Y are sold separately. b. Compute for the optimal price and profits if X and Y are only sold as a package. (Pure bundling) c. Compute for the optimal prices and profits if the firm sells X and Y separately and as a package (mixed bundling) d. Which among these three strategies is the most profitable? 2Problem 2 A firm produces two products, the demands for which are independent. Each of the products has zero marginal cost. The firm faces four consumers with the following reservation prices: Alyona Betty Celine Delilah Good 1 30 40 80 70 Good 2 140 100 60 60 Bundle 170 140 140 130 (a) First, calculate the profit-maximizing prices and the resulting profit if goods are sold separately. Next, suppose the firm can use pure bundling (i.e., it only sells the products only as a bundle, and does not sell the products separately). Calculate the profit-maximizing price of the bundle and the resulting profit. (b) Analyze whether or not the firm can maximize its profit by using mixed bundling. If so, what is the profit-maximizing pricing strategy? If not, briefly explain why. J