Business

Chapter 14 Pricing Techniques and Analysis Solutions to Exercises 1. MR = P(1 + (1/Ed)) = MC U.S. market: P(1 + (1/?2)) = 6 P = $12/ unit of measurement Overseas market: P( 1 + (1/?3)) = 4.5 P = $6.75/unit 2. Optimal price discrimination would equate the derived MR in to each one market equal to the $ one hundred twenty marginal cost of the latest seat sold. MR is derived as follows from the given data $120 = P1 (1 + 1/-1.3) = Pc(1 + 1/-1.4) = Pd(1 + 1/-1.9) $120 = P1 (-.3/-1.3) = Pc (-.4/-1.4) = Pd (-.9/-1.9) $120 = P1 (+.231) = Pc (+.285) = Pd (+.474) P1= $519 Pc = $421 Pd = $253 3. a. Demand make: P1 = 100 ? 2Q1 manufactured goods P2 = 80 ? Q2 semi-manufactured goods Cost function: TC = 20 + 4(Q1 + Q2) Profit function: ? = ?20 + 96Q1 + 76Q2 ? 2Q12 ? Q22 b. ??/?Q = 96 ? 4Q = 0 1 1 * = 24 heaps; P * = $52/unit Q 1 1 ??/?Q2 = 76 ? 2Q2 = 0 Q * = 38 tons; P * = $42/unit 2 2 127 This edition is intended for determination outside of the U.S. only, with content that whitethorn be different from the U.S. Edition. This may not be resold, copied, or distributed without the prior consent of the publisher. 128 Chapter 14/Pricing Techniques and Analysis MR1 = ?(TR)/?Q1 = 100 ? 4Q1 = 100 ? 4(24) = $4/unit c. TR = 100Q1 ? 2Q12 + 80Q2 ? Q22 MR2 = ?(TR)/?Q2 = 80 ? 2Q2 = 80 ? 2(38) = $4/unit d. ? * = ?20 + 96(24) + 76(38) ? 2(24)2 ? (38)2 = $2,576 e.

P1 = P2 = P 100 ? 2Q1 = 80 ? Q2 Q2 = ?20 + 2Q1 ? = ?1940 + 328Q1 ? 6Q12 Q*1 = 27.3; Q*2 = ?20 + 2(27.3) = 34.6 Q* = 27.3 + 34.6 = 61.9 P* = 100 ? 2(27.3) = $45.4 ? * = (45.4)(61.9) ? 20 ? 4(61.9) = $2542.66 f. E1 = ?Q1/?P1 × P1/Q1 E2 = ?Q2/?P2 × P2/Q2 d?/dQ1 = 328 ? 12Q1 = 0 E1 = ?.5(45.4/27.3) = ?.83; E2 = ?1(45.4/34.6) = ?1.3 The more inelastic the demand, i.e., the lower the |Ed| is, the higher(prenominal) should be the price charged. Accordingly, in b above, P1 = $52 and P2 = $42. 4. Sony may wish to bundle the products because inversely correlated demands always allude higher profitability for bundled than independent sales. For example, DVDs may be more profitable as a promotional... If you want to get a full essay, order it on our website: Orderessay

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