Marryweather Ltd. is a company that sells machines in the US and the EU. The inverse demand functions for the two markets are given as Pus = 10 - yus and peu = 6-YEU, respectively. The machines for both markets are manufactured in Poland with a fixed % marginal cost of $2 and sold to clients only through its online retail stores (assume the online stores are affiliates of the company and that the profits are directly recorded by Marryweather, Ltd.). Due to its unique patented technology, the company is a monopoly in both markets. 1. Assuming Marryweather, Ltd. has an exclusive territorial online retail agreement in each market with its vendors (an online vendor in the US cannot sell to an address in Europe, and vice versa), what would be the profit-maximizing prices and quantities in the US and the EU? What are the profits from each market? 2. Assume, instead of the exclusive territorial agreements, Marryweather, Ltd. has one global retail agreement with its online vendor that sells to both markets. Drawing a diagram (with the proper labels) show the combined market demand and marginal revenue. What is the price? What is the total profit? How many machines does the company sell in each market? 3. If Marryweather, Ltd. could perfectly price discriminate in the combined market from part (b), what would be the price and quantity? What is the total profit?
Marryweather Ltd. is a company that sells machines in the US and the EU. The inverse demand functions for the two markets are given as Pus = 10 - yus and peu = 6-YEU, respectively. The machines for both markets are manufactured in Poland with a fixed % marginal cost of $2 and sold to clients only through its online retail stores (assume the online stores are affiliates of the company and that the profits are directly recorded by Marryweather, Ltd.). Due to its unique patented technology, the company is a monopoly in both markets. 1. Assuming Marryweather, Ltd. has an exclusive territorial online retail agreement in each market with its vendors (an online vendor in the US cannot sell to an address in Europe, and vice versa), what would be the profit-maximizing prices and quantities in the US and the EU? What are the profits from each market? 2. Assume, instead of the exclusive territorial agreements, Marryweather, Ltd. has one global retail agreement with its online vendor that sells to both markets. Drawing a diagram (with the proper labels) show the combined market demand and marginal revenue. What is the price? What is the total profit? How many machines does the company sell in each market? 3. If Marryweather, Ltd. could perfectly price discriminate in the combined market from part (b), what would be the price and quantity? What is the total profit?
Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
14th Edition
ISBN:9781305506381
Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Chapter5: Business And Economic Forecasting
Section: Chapter Questions
Problem 6E: The economic analysis division of Mapco Enterprises has estimated the demand function for its line...
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Transcribed Image Text:Marryweather Ltd. is a company that sells machines in the US and the EU. The inverse
Pus = 10 – Yus and pgu = 6 –
YEu,
demand functions for the two markets are given as
respectively. The machines for both markets are manufactured in Poland with a fixed %
marginal cost of $2 and sold to clients only through its online retail stores (assume the
online stores are affiliates of the company and that the profits are directly recorded by
Marryweather, Ltd.). Due to its unique patented technology, the company is a monopoly in
both markets.
1. Assuming Marryweather, Ltd. has an exclusive territorial online retail agreement in
each market with its vendors (an online vendor in the US cannot sell to an address
in Europe, and vice versa), what would be the profit-maximizing prices and
quantities in the US and the EU? What are the profits from each market?
2. Assume, instead of the exclusive territorial agreements, Marryweather, Ltd. has one
global retail agreement with its online vendor that sells to both markets. Drawing a
diagram (with the proper labels) show the combined market demand and marginal
revenue. What is the price? What is the total profit? How many machines does the
company sell in each market?
3. If Marryweather, Ltd. could perfectly price discriminate in the combined market
from part (b), what would be the price and quantity? What is the total profit?
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