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Ash Bus 640 Week 4 Market Structures and Pricing Decisions Applied Problems

  • Date Submitted: 12/08/2015 01:50 AM
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BUS 640 Week 4 Market Structures and Pricing Decisions Applied Problems

Market Structures and Pricing Decisions Applied Problems. Please, complete the following 2 applied problems in a Word or Excel document. Show all your calculations and explain your results. Submit your assignment in the drop box by using the Assignment Submission button.

1.) A small company that manufactures plastic vacuum-suction covers for round household plates has a monopoly, which is safeguarded by a utility patent. The market demand curve for this item is approximated to be: Q = 6009 - 25P where Q is the quantity of dish covers for each year and P is in dollars. Expense approximation processes have established that the firm’s expense function is shown by TC = 120 + 2500Q - 0.25*Q2.

a. What is the profit-maximizing price and output level? Solve this algebraically for equilibrium P and Q and also plot the MC, D and MR curves and illustrate the equilibrium point.

b. What profit do you expect that the firm will make in the first year?

c. Do you expect this profit level to continue in subsequent years? Why or why not?

2.) Greener Grass Company (GGC) competes with its major competitor, Better Lawns and Gardens (BLG), in the delivery and installing of in-ground lawn watering systems in the prosperous western suburbs of a main east-coast town. Previous year, GGC’s price for the standard lawn system was $1,995 compared with BLG’s rate of $2,100. GGC set up 9,130 systems, or roughly 55% of total sales and BLG set up the remaining. (No doubt, several additional systems were set up by do-it-yourself householders because the components are easily available at hardware shops.) GGC has significant additional capacity-it could...


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