Find gillette''s profit-maximizing price and output

Assignment Help Econometrics

Reference no: EM131248378

Imagine that Gillette has a monopoly in the market for razor blades in Mexico. The market demand curve for blades in Mexico is P = 968 - 20Q, where P is the price of blades in cents and Q is annual demand for blades expressed in millions. Gillette has two plants in which it can produce blades for the Mexican market: one in Los Angeles and one in Mexico City. In its L.A. plant, Gillette can produce any quantity of blades it wants at a marginal cost of 8 cents per blade. Letting Q₁ and MC₁ denote the output and marginal cost at the L.A. plant, we have MC₁(Q₁) = 8. The Mexican plant has a marginal cost function given by MC₂(Q₂) 1 + 0.5Q₂.

a) Find Gillette's profit-maximizing price and quantity of output for the Mexican market overall. How will Gillette allocate production between its Mexican plant and its U.S. plant?

b) Suppose Gillette's L.A. plant had a marginal cost of 10 cents rather than 8 cents per blade. How would your answer to part (a) change?

Reference no: EM131248378

Questions Cloud

Review the list of films on demand : Review the list of Films on Demand: Sociology Collection: Social Institutions to select and watch one video from each of the following categories listed: family, education, and religion.

What is the debt capacity : What is the threshold B∗, i.e., the value of the private per-unit benefit above which the entrepreneur shirks?- what is the debt capacity?

About what price should the firm charge : The marginal cost of preparing a large latte in a specialty coffee house is $1. The firm's market research reveals that the elasticity of demand for its large lattes is constant, with a value of about -1.3. If the firm wants to maximize profit fro..

Calculate the outcome of the hedge in the us dollar : Do not round the numbers in the internal steps of your computations. If your company chooses to hedge this exposure in the forward market, calculate the outcome of this hedge in the US dollar.

Find gillette''s profit-maximizing price and output : Suppose Gillette's L.A. plant had a marginal cost of 10 cents rather than 8 cents per blade. How would your answer to part (a) change?

Legal topics that apply to the company : Find a company that has been in the news recently. Using the material that you read in Appendix B of "The business guide to legal literacy: what every manager should know about the law" write a 250 word essay where you clearly identify and discus..

Describe two types of interference : 1. Identify and describe two types of interference you have experienced. Describe how they affected the communication taking place in your situation.

What degree are you able to exercise autonomy and control : What is the emotional labor (Ciulla) required of your job? What social and personal requirements exist beyond the economic transaction for which you were hired? To what degree are you able to exercise autonomy and control in your work environment a..

Show that there is a cutoff a : Show that there is a cutoff A such that if Ai A for i = 1, 2, both firms receive funding.

User Account

All Pages