I am having trouble with the project materials on this particular project. I am uncertain to what they are asking in reference to the pricing scenarios using the market power.© BrainMass Inc. brainmass.com October 9, 2019, 9:06 pm ad1c9bdddf
I am having trouble with the project materials on this particular project. I am uncertain to what they are asking in reference to the pricing scenarios using the market power.
Let me explain to you. The question is asking you to use the excel template to find out the price the company should charge for Tanziclor. How do you find the price that the company should charge? The profit maximizing price; How is the profit maximizing price found? By equating the marginal revenue to marginal cost; The case gives you three figures for each market, the demand elasticity, the marginal costs and the fixed costs. You need to feed these three figures into your excel template.
Let me feed these three figures for Europe into the template. After I feed in the three values of demand elasticity-1.6, the fixed cost and marginal cost, we get the following results on the template. I encourage you to do it yourself. The profit maximizing level is the one where the marginal cost is equal to marginal revenue and in this case the marginal cost of $3.00 is equal to the marginal revenue $3.00. Also this level of price is within the acceptable range of $2 to $15. The profit maximizing price ...
Pricing with marketing power is discussed in great detail in this solution.