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

Name two strategies is most likely to lead to development, Explain which of...

Explain which of the two strategies is most likely to lead to development. Empirically, it seems rather evident that export-orientation has been more successful than import-sub

Effect of that on the tofu market, New technology was just invented that de...

New technology was just invented that decreases the cost of planting and harvesting soybeans: show the effect of this on the soybean market. Show the effect of that on the tofu mar

Retirement planning, For retirement planning, you decided to deposit $1,000...

For retirement planning, you decided to deposit $1,000 per month and increase your deposit by $100 per month. How much will you have at the end of 10 years if the bank pays 3% annu

Population growth is greater than the growth of real output, If population ...

If population growth is greater than the growth of real output, A. real per capita Gross Domestic Product (GDP) growth will be less than the growth of real Gross Domestic Product

Create a gantt chart of online food store, In today's world when almost ev...

In today's world when almost everything has become easy with just a click on the mouse, even shopping for normal groceries has been revolutionized by making it online. The project

Quantity theory of money, what is the importance of the quantity theory of ...

what is the importance of the quantity theory of money

Explain the following equation, Which of the following equations is FALSE f...

Which of the following equations is FALSE for perfectly competitive firms? A. Total cost = fixed cost + variable cost B. Marginal cost = change in total cost / change in quantity o

National income of india, project with introduction,aims and objectives,nee...

project with introduction,aims and objectives,need and importance,preparation of data and information,case study,problems,conclusion

Deceased relative at zero prices, Kennesaw University Professor Frank A. Ad...

Kennesaw University Professor Frank A. Adams III and Auburn University Professors A. H. Barnett and David L. Kaser man recently estimated the effect of legalizing the sale of cadav

Characteristic of capitalism, Knowing that a neoclassical, capitalist econo...

Knowing that a neoclassical, capitalist economy depends on continuous economic growth (by making its production, distribution, and consumption more efficient), what might a savvy p

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