ECP Project

1. Suppose demand is given by (Q = 1100 – 300P) and MC=2. Ignore any fixed costs (irrelevant in the short run anyway) and calculate price, quantity and profit.

2. Suppose that after you are hired, you point out that the firm really serves two markets and transfers are impossible. Thus, demand is given by (QT = 600 – 120PT) AND (QL = 500 – 180PL) and MC=2. Ignore any fixed costs and calculate prices, quantities and TOTAL profit.

4. The Boca Raton Company announces that if it reduces its price subsequent to a purchase, the early customer will get a rebate so that he or she will pay no more than those buying after the price reduction.

A. If the Boca Raton Company has only one rival, and if its rival too makes such an announcement, does this change the payoff matrix? If so, in what way?

B. Do such announcements tend to discourage price cutting? Why or why not?

Skills: Economics, Article Writing

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