Reference no: EM13453006

The Pear Computer Company just developed a totally revolutionary new personal computer. It estimates that it will take competitors at least two years to produce equivalent products. The demand function for the computer is estimated to be

P= 2,500 - 0.0005Q

The  marginal (and average variable) cost of producing the computer is $900.

A. Compute the profit maximizing price and output levels assuming Pear acts as a monopolist for its products

B. Determine the total contribution to profits and fixed cost from the solution generated in Part A.

Pear Computer is considering an alternative pricing strategy of price skimming. It plans to set the following schedule of prices over the coming two years:

Time Period                               Price                                         Quantity Sold

1                                              $2,400                                      200,000

2                                              2,200                                        200,000

3                                              2,000                                        200,000

4                                              1,800                                        200,000

5                                              1,700                                        200,000

6                                              1,600                                        200,000

7                                              1,500                                        200,000

8                                              1,400                                        200,000

9                                              1,300                                        200,000

10                                             1,200                                        200,000

C. Calculate the contribution to profit and overhead for each of the 10 time periods and prices.