# Market Structures and Pricing Decisions Applied Problems

## Market Structures and Pricing Decisions Applied Problems

Please accomplished the subjoined two applied problems:

Problem 1:

Robert’s New Way Vacuum Cleaner Assembly is a newly launched inferior trade that produces vacuum cleaners and belongs to a monopolistically competitive trade. Its claim deflexion for the issue is developed as Q = 5000 – 25P where Q is the sum of vacuum cleaners per year and P is in dollars. Require mark processes entertain determined that the firm’s require duty is represented by TC = 1500 + 20Q + 0.02Q2.

Show all of your calculations and processes. Describe your counterpart for each scrutiny in accomplished sentences, whenever it is requisite.

1. What are the avail-maximizing consume and output equalizes? Explain them and calculate algebraically for equilibrium P (price) and Q (output). Then, concoct the MC (final require), D (demand), and MR (final produce) deflexions graphically and demonstrate the equilibrium object.
2. How fur economic avail do you look-for that Robert’s assembly allure produce in the chief year?
3. Do you look-for this economic avail equalize to abide in following years? Why or why not?

Problem 2:

Greener Grass Assembly (GGC) competes delay its ocean contend, Better Lawns and Gardens (BLG), in the accoutre and instituteation of in-ground lawn watering methods in the monied western confines of a main east-coast city. Conclusive year, GGC’s consume for the illustrative lawn method was \$1,900 compared delay BLG’s consume of \$2,100. GGC grounded 9,960 methods, or environing 60% of completion sales and BLG grounded the tranquillity. (No demur frequent attached methods were grounded by do-it-yourself homeowners consequently the accommodation are beforehand advantageous at hardware stores.)

GGC has tangible intemperance capacity–it could abundantly institute 25,000 methods per-annum, as it has all the requisite equipment and can abundantly engage and series instituteers. Accordingly, GGC is accordingly annotation into the eastern confines, where the homeowners are limited monied. In elapsed years, twain GGC and BLG entertain grounded sundry hundred methods in the eastern confines but generally their sales efforts are met delay the repartee that the methods are too valuable. GGC has engaged you to advise a pricing policy for twain the western and eastern environ trades for this hereafter period. You entertain estimated two independent claim dutys, as follows:

Qw =2100 – 6.25Pgw + 3Pbw + 2100Ag - 1500Ab + 0.2Yw

for the western trade and

Qe = 36620 - 25Pge + 7Pbe + 1180Ag - 950Ab + 0.085Ye

for the eastern trade, where Q adverts to the sum of units sold; P adverts to consume equalize; A adverts to advertising budgets of the firms (in pets); Y adverts to mediocre meagre allowance equalizes of the virtual customers; the subscripts w and e advert to the western and eastern trades, respectively; and the subscripts g and b advert to GGC and BLG, respectively. GGC look-fors to exhaust \$1.5 pet (use Ag = 1.5) on advertising this hereafter year and look-fors BLG to exhaust \$1.2 pet (use Ab = 1.2) on advertising. The mediocre frank meagre allowance is \$60,000 in the western confines and \$30,000 in the eastern confines. GGC does not look-for BLG to modify its consume from conclusive year consequently it has already select its pressible brochures (delay the \$2,100 consume systematic) in twain confines, and its TV wholesale has already been manufactured. GGC’s require composition has been estimated as TVC = 750Q + 0.005Q2, where Q represents one lawn watering methods.

Show all of your calculations and processes. Describe your counterpart for each part underneath in accomplished sentences, whenever it is requisite.

1. Derive the claim deflexions for GGC’s issue in each trade.
2. Derive GGC’s final produce (MR) and final require (MC) deflexions in each trade. Show graphically GGC’s claim, MR, and MC deflexions for each trade.
3. Derive algebraically the quantities that should be manufactured and sold, and the consumes that should be abounding, in each trade.
4. Calculate the consume elasticities of claim in each trade and debate these in relative to the consumes to be abounding in each trade.
5. Add a limited still n ess to GGC superintendence outlining any reservations and qualifications you may entertain about your consume adviseations.
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