Suppose Phineas is the only inventor and seller of space su…
Suppose Phineas is the only inventor and seller of space suits in town and therefore holds a monopoly on the sale of space suits. Phineas can offer additional space suits at a constant $150 per suit (marginal cost). For simplicity assume that he has no fixed costs. Show your work for receive full points. The following is the demand schedule for space suits in Phineas’ town: Quantity of space suits demanded Price of a space suit Total Revenue (TR) Marginal Revenue (MR) 0 $1,000 — 1 $ 800 2 $ 500 3 $ 450 4 $ 300 5 $ 150 A. Calculate TR and MR for the quantities in the table above B. If Phineas acts as a profit maximizing monopolist, how many space suits will he offer and what price will he charge? C. What is Phineas’ profit? D. If the market for space suits were perfectly competitive, what would be the efficient price? E. If Phineas was able to price discriminate and also sell his space suits to aliens who have a higher elasticity of demand than humans (the table above) for space suits, how should Phineas price to aliens and humans? Hint: You can assume that these markets are segmented and there is no possibility of resale.
Read DetailsFrito-Lay dominates the snack food business, with half of a…
Frito-Lay dominates the snack food business, with half of all salty snack items. Competitors say that Frito-Lay has secured its dominant position with shelf-space rentals in retail stores, paying as much as $40,000 annually to secure prime shelf space in grocery and convenience stores. “Frito can afford it, ” says a regional rep for a competing company, “we can’t”. A. Explain what type of market structure firms in the salty snack foods market operate under. Why do you say that? B. What are the costs faced by firms in salty snacks? Please label whether these costs are fixed or variable, implicit or explicit. C. What can competitors do in the face of this dominance by Frito-Lay? Explain using what you have learned in module 4.
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