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    Homework 5 - MGMT 335

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    julettagabrielyan
    The document contains 5 questions about pricing strategies and optimal decision making for different monopoly and auction scenarios: 1. A monopoly should sell 4 units in a package and charge $320 per package to maximize profits given demand and cost functions. 2. A software company should charge different per unit prices for the first 10 units ($1,450 each) and additional units ($1,225 each) to maximize profits over charging a single price. 3. A bakery making bran muffins should sell 3 muffins in each package and charge $12 per package to maximize profits given the new demand and cost functions.

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    Homework 5 - MGMT 335

    Uploaded by

    julettagabrielyan
    83 views1 page
    The document contains 5 questions about pricing strategies and optimal decision making for different monopoly and auction scenarios: 1. A monopoly should sell 4 units in a package and charge $320 per package to maximize profits given demand and cost functions. 2. A software company should charge different per unit prices for the first 10 units ($1,450 each) and additional units ($1,225 each) to maximize profits over charging a single price. 3. A bakery making bran muffins should sell 3 muffins in each package and charge $12 per package to maximize profits given the new demand and cost functions.

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    The document contains 5 questions about pricing strategies and optimal decision making for different monopoly and auction scenarios: 1. A monopoly should sell 4 units in a package and charge $320 per package to maximize profits given demand and cost functions. 2. A software company should charge different per unit prices for the first 10 units ($1,450 each) and additional units ($1,225 each) to maximize profits over charging a single price. 3. A bakery making bran muffins should sell 3 muffins in each package and charge $12 per package to maximize profits given the new demand and cost functions.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    83 views1 page

    Homework 5 - MGMT 335

    Uploaded by

    julettagabrielyan
    The document contains 5 questions about pricing strategies and optimal decision making for different monopoly and auction scenarios: 1. A monopoly should sell 4 units in a package and charge $320 per package to maximize profits given demand and cost functions. 2. A software company should charge different per unit prices for the first 10 units ($1,450 each) and additional units ($1,225 each) to maximize profits over charging a single price. 3. A bakery making bran muffins should sell 3 muffins in each package and charge $12 per package to maximize profits given the new demand and cost functions.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 1

    Homework 5

    MGMT 335

    1. A monopoly is considering selling several units of a homogeneous product as a single


    package. Analysts at your firm have determined that a typical consumer’s demand for
    the product is Qd = 80 − 0.5P, and the marginal cost of production is $100.
    a. Determine the optimal number of units to put in a package.
    b. How much should the firm charge for this package?

    2. You are a pricing analyst for QuantCrunch Corporation, a company that recently spent
    $15,000 to develop a statistical software package. To date, you only have one client. A
    recent internal study revealed that this client’s demand for your software is Qd = 300 –
    0.2P and that it would cost you $1,000 per unit to install and maintain software at this
    client’s site. The CEO of your company recently asked you to construct a report that
    compares (1) the profit that results from charging this client a single per- unit price with
    (2) the profit that results from charging $1,450 for the first 10 units and $1,225 for each
    additional unit of software purchased. Construct this report, including in it a
    recommendation that would result in even higher profits.

    3. The American Baker’s Association reports that annual sales of bakery goods last year
    rose 15 percent, driven by a 50 percent increase in the demand for bran muffins. Most of
    the increase was attributed to a report that diets rich in bran help prevent certain types of
    can- cer. You are the manager of a bakery that produces and packages gourmet bran
    muffins, and you currently sell bran muffins in packages of three. However, as a result of
    this new report, a typical consumer’s inverse demand for your bran muffins is now P = 8
    − 1.5Q. If your cost of producing bran muffins is C(Q) = 0.5Q, determine the optimal
    number of bran muffins to sell in a single package and the optimal package price.

    4. As the manager of Smith Construction, you need to make a decision on the number of
    homes to build in a new residential area where you are the only builder. Unfortunately,
    you must build the homes before you learn how strong demand is for homes in this large
    neighborhood. There is a 60 percent chance of low demand and a 40 percent chance of
    high demand. The corresponding (inverse) demand functions for these two scenarios are
    P = 300,000 − 400Q and P = 500,000 − 275Q, respectively. Your cost function is C(Q) =
    140,000 + 240,000Q. How many new homes should you build, and what profits can you
    expect?

    5. You are one of five risk-neutral bidders participating in an independent private values
    auction. Each bidder perceives that all other bidders’ valuations for the item are evenly
    distributed between $30,000 and $70,000. For each of the following auction types,
    determine your optimal bidding strategy if you value the item at $45,000.
    a. First-price, sealed-bid auction.
    b. Dutch auction.
    c. Second-price, sealed-bid auction.
    d. English auction.

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