Purchase Solution

Pricing and Output

Not what you're looking for?

Ask Custom Question

Suppose three firms face the same total market demand for their products. The demand is

P Q
$80 20,000
70 25,000
60 30,000
50 35,000

Suppose further that all three firms are selling their product for $60 and each has about one-third of the total market. One of the firms, in an attempt to gain market share at the expense of the others, drops it's price to $50. The other two quickly follow suit.

a. What impact would this move have on the profits of all three firms? Explain your reasoning.

b. Would those firms have been better off in terms of profit if they all had raised the price to $70? Explain

Attachments
Purchase this Solution
Purchase this Solution
Free BrainMass Quizzes
Economics, Basic Concepts, Demand-Supply-Equilibrium

The quiz tests the basic concepts of demand, supply, and equilibrium in a free market.

Basics of Economics

Quiz will help you to review some basics of microeconomics and macroeconomics which are often not understood.

Elementary Microeconomics

This quiz reviews the basic concept of supply and demand analysis.

Economic Issues and Concepts

This quiz provides a review of the basic microeconomic concepts. Students can test their understanding of major economic issues.

Pricing Strategies

Discussion about various pricing techniques of profit-seeking firms.

View More Free Quizzes
Related BrainMass Solutions

  • Business strategy, Managerial economics

    Under limit pricing, the incumbent will produce A) less than the monopoly output and charge a price that is less than the monopoly price. B) more than the monopoly output and charge a price that is less than the monopoly price.

  • Key metrics to determine total market share, revenue, cumulative

    to Advance - 2 years Simulation Output for Run #1 and Run #2 (See the table) The output results of Run #1 and Run #2 indicate the different impacts on the market share for both the pricing strategies.

  • Monopoly Pricing and Output

    39868 Monopoly Pricing and Output 3 (Monopoly Pricing and Output) Shelley works at University florist in Minneapolis.

  • Pricing and output decisions - Monopoly and Perfect competition

    621982 Pricing and output decisions - Monopoly and Perfect competition Your consulting firm was just granted an exclusive contract for your state.

  • Revenue maximization price and price discrimination

    The resulting level of output the firm produces may be consistent with a marginal pricing approach if the long-run average cost curve exhibits constant returns to scale over the relevant range of output c.

  • Calculating profit maximizing output and price level

    As a monopoly, calculate output, price and profits at the profit maximizing level. B. What price and profit levels would prevail following expiration patent protection (assume perfectly competitive pricing would result). Solution: A.

  • Monopoly

    213517 Sophisticated Monopoly Pricing Sophisticated Monopoly Pricing 1. The Locust Corporation is comprised of a marketing division, and production division.

  • Simulation and developing the analysis based the differentiation

    What would you have done differently as it relates to pricing, process improvement, or other? Compare and contrast the pricing decisions made in SLP1 and SLP2.

  • Natural monopolist - profit maximizing price and quantity

    365996 Price and quantity / output (a) What price and quantity will prevail if the monopolist isn't regulated (a1) price _______ (a2) quantity _______ (b) What price-output combination would exist with efficient pricing (MC = p )?

  • CVP simulation

    that reduced pricing strategy is favorable for the company because of improvement in revenue, cumulative profitability, and unit cost.

View More Related Solutions