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

Ppf model, using the ppf model explain the principles of economics of alloc...

using the ppf model explain the principles of economics of allocative efficiency

Explain the multiplier effect with example, Explain the multiplier effect w...

Explain the multiplier effect with example Deposits and loans in banks give rise to an important multiplier effect. We use a simple example to illustrate this effect. Consider

Illustrate biological effects of ochratoxin, Q. Illustrate Biological effec...

Q. Illustrate Biological effects of Ochratoxin? Biological effects: It is associated with the chronic progressive kidney disease in humans known as Balkan endemic nephropathy.

Determine the value of the goverment expenditure multiplier, Assume that th...

Assume that the economy is characterized by the following structural equations: C = 160 + 0.6 (4 - T) I = 150; G = 150; T = 100. a) Determine the equilibrium output level

Full employment and the natural rate, Is the natural rate of unemployment f...

Is the natural rate of unemployment fixed? Why or why not? How are full employment and the natural rate of unemployment related? Is the actual rate of unemployment currently greate

Long-run labor demand, Long-Run Labor Demand: Graph an increase in the...

Long-Run Labor Demand: Graph an increase in the wage when only labor is a 'normal' input to production. Graph an increase in the wage when both inputs are 'normal'

Find the equilibrium quantity, Find the Equilibrium Quantity In a smal...

Find the Equilibrium Quantity In a small town only two candy shops operate and they compete with each other in quantity. Consumers do not differentiate between candies sold by

Trade in services, TRADE IN SERVICES: India had objected to  the  incl...

TRADE IN SERVICES: India had objected to  the  inclusion of  trade in services  in  the agreement for  the UR  negotiations. The  Indian negotiations continued to raise object

Wi cost of debt and wacc, hi I just found an interesting problem on your pa...

hi I just found an interesting problem on your page,(wood investments ... Mutch PLC) I would like to see the answer Could you please give me a quote for the answer?

Commercial transactions in blood from the egoistic, Examine the pros and co...

Examine the pros and cons of commercial transactions in blood from the egoistic, the utilitarian, and the Kantian perspectives.

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