Exam 12: Pricing Practices

An imperfectly competitive firm produces two products (A and B) with interrelated demand functions. Consumers view these products as complements. If the firm increases the number of units of A sold from 150 to 151, total revenue from the sale of A will increase from $1,500 to $1,505. Taking into account the interdependence between A and B, the marginal revenue from the sale of one additional unit of A must be

Incremental analysis refers to the fact that firms should only make decisions based on how a change will affect

The pricing of the intermediate goods sold between the two subdivisions of the same company is knows as

A firm manufactures a product that is sold on two different markets (A and B) that have the following demand and joint marginal cost functions:Q_A = 400 - P_AQ_B = 120 - P_BMC = 20 +QWhat prices in each market should the firm charge to maximize profits assuming that the markets are separate and the firm can engage in price discrimination?

A firm produces two products (A and B) jointly. Every time a unit of A is produced, a unit of B is also produced as a byproduct. The demand functions for A and B are:The marginal cost of producing a joint output is: $Q _ { A } = 300 - 2 P _ { A } \quad Q _ { B } = 100 - P _ { B }$ MC = 50 + QAssuming that disposal is costless, determine the price that should be charged for each of the products in order to maximize profits.

A firm charges $25 for a product. If the markup is 25 percent, then the fully allocated average cost of the product is

A firm produces a product at a fixed marginal cost of $2 and sells the product on two different markets (A and B) . The demand on market A is Q_A = 10 - P. The demand on market B is Q_B = 20 - P. What quantity should the firm sell on market A?

Persistent dumping and sporadic dumping may be desirable if benefits to domestic consumers exceed the losses experienced by domestic producers.

A firm produces two products (A and B) jointly. Every time a unit of A is produced, a unit of B is also produced as a byproduct. The demand functions for A and B are:The marginal cost of producing a unit of joint output is: $Q _ { A } = 300 - 4 P _ { A } \quad Q _ { B } = 150 - 2 P _ { B }$ Assuming that disposal is costless, determine how many units the firm should produce to maximize profits? $M C = 100 + Q$

If the external market for an intermediate product is perfectly competitive, then the transfer price should be set equal to

A firm has two semiautonomous divisions: production and marketing. The production division manufactures a product that is purchased and then resold by the marketing division. The marginal cost functions for the production division and for the value added by the marketing division are defined below. M=2Q M=Q The demand function for the product is: $Q D = 100 - P$ (i)Assume that there is no external market for the output of the production division. How many units should be produced and what transfer price should be paid to the production division by the marketing division? (ii)Assume that the external market for the output of the production division is perfectly competitive and that the market price is $52. How many units should be produced by the production division, how many should be purchased by the marketing division, what transfer price should be paid to the production division by the marketing division, and what price should be charged for the product by the marketing division?