Determine the optimum prices and outputs-probability, Macroeconomics

Assignment Help:

Given the following:

Airbus Boeing
Demand P = 182.868 - 0.0003Q P = 198.6592 - 0.00013Q
TVC Curve TVC = 104.8822Q - 0.001Q^2 + 0.09Q^3 TVC = 25.8678Q - 0.00023Q^2 + 0.4Q^3

In addition, the joint group analysis determined the market would bear a price per plane somewhere within the following parameters:

Table 1
Price per plane
(million $) Probability
125 .25
175 .25
225 .5

1. First estimate the price per plane using the estimated prices and probabilities given in Table 1.

2. Determine the optimum prices and outputs for both Airbus and Boeing if they decide to proceed individually without collaborating in the development of the VLCT. Use the Demand and AVC equations outlined above in this analysis. Determine the profitability of this approach for each of the companies if the Fixed Costs are $500 million and $700 million for Airbus and Boeing, respectively.

3. Now analyze the potential for a collaborative approach by Airbus and Boeing. Assume there is a 50% probability that each of the companies' estimates is accurate in the Demand and Cost equations provided above. (Multiply both the demand and cost curves for each of the entities by 0.5, add them together. Then use that result to determine optimum price/quantity levels if they collaborate.) Also determine profitability assuming that the joint Fixed Cost is $600 million.

4. Finally, summarize the results of your analysis and make a recommendation about what you consider the most appropriate process for Airbus and Boeing to use in the development of the VLCT equipment. It is recommended that you use an Excel® spreadsheet to summarize the results. It might also be useful to construct an Excel® section for the quadratic formula that will be required for the analysis.


Related Discussions:- Determine the optimum prices and outputs-probability

Real output and employment increases, Historically, shifts toward a more ex...

Historically, shifts toward a more expansionary monetary policy have often been associated with increases in real output. Is this surprising? Why or why not? Can an expansion in th

Change of production possibilities curve affects, Analyze the relationship ...

Analyze the relationship between the production possibilities curve and the circular flow diagram. Discuss how the change of production possibilities curve affects the circular flo

Input combination if the price of capital decreased, In reference to the ab...

In reference to the above question, assume you know the combination of inputs that minimizes cost. What would happen to this input combination if the price of labor increased? What

Difference between sampling error and standard error, Which is not true of ...

Which is not true of the difference between sampling error and standard error? a. Standard error is a difference from the population. b. Sampling error can't usually be calcula

Is-lm approach, with help of is-lm technique explain the process of integra...

with help of is-lm technique explain the process of integration of money market and goods market by way of keynesian approach

Define public good, A public good: A) Generally results in substantial n...

A public good: A) Generally results in substantial negative externalities. B) Can never be provided by a nongovernmental organization. C) Costs essentially nothing to prod

Ana, how long will it take for you to help me with assignment

how long will it take for you to help me with assignment

What are the market interest rates, What are the Market interest rates ...

What are the Market interest rates The most important interest rates from a macroeconomic perspective are interest rates that the government pays on the loans they use to finan

GDP, NATIONAL INCOME STATISTICS

NATIONAL INCOME STATISTICS

Keynesion model, what would be effect of fiscal and monetry policy on price...

what would be effect of fiscal and monetry policy on price and output level if meges are flexible and rigied?

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd