26) The incomplete information means that: a) Companies cannot know the performance of their rivals in the previous period b) The price charged by the competitors is not a fair price c) Individuals do not know the characteristics of the products supplied in the market d) Individuals cannot know the strategy of the other players in the market

26) The incomplete information means that: a) Companies cannot know the performance of their rivals in the previous period b) The price charged by the competitors is not a fair price c) Individuals do not know the characteristics of the products supplied in the market d) Individuals cannot know the strategy of the other players in the market

Managerial Economics: A Problem Solving Approach

5th Edition

ISBN:9781337106665

Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Chapter16: Bargaining

Section: Chapter Questions

Problem 16.1IP

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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 ?
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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%
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Problem 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
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