Question

Motorcycles USA is a company that manufactures and sells motorcycles in North America. It has the following demand function for its motorcycles:

P = 30,000 – 100Q

Motorcycles USA has a marginal cost (MC) that is constant and equal to $4,000.

What will Motorcycles USA’s price be if it decides to sell the motorcycles by itself? What will the price be if it sells them though MC Dealership, LLC an independent distributor? (10 points)

Consider that when Motorcycles USA contracts with MC Dealership, LLC, it takes into account that MC Dealership, LLC faces the same demand curve. Assume that (MC) is constant and equal to $4,000.

What is the impact of distributing the motorcycles through MC Dealership, LLC on the price of the motorcycles? (10 points)

Be sure to explain your calculations

Answer 1

Solution

Motorcycles USA is a company that manufactures and sells motorcycles in North America. It has the following demand function for its motorcycles:

P= 30,000-100

TR=30,000-100

MR=30000-200

MC=4000

Motor cycle USE sells its off then project maximized when MR=MC

30000-200 er =4000

26000=200

P=30000-100(130)=17000

=(1700-4000)(130)

=(13000)13

When Dealership ,LLC bells the motocycle less than 17000.

(2) if USA motorcycle sells LLC at p= 17000 then for LLC it will me wear LLC will For LLC it will Change

MR=MC

=13000/200=65

P=30000-100(65)=23500

LLC were change 23500

Thus USA Automobile should sell them sellers in order to maximum profit.