Question
In: Economics
Suppose that Michelin is the only producer of tires and Toyota the only producer of cars....
Suppose that Michelin is the only producer of tires and Toyota the only producer of cars. The demand function for cars is given by Q = 40 − 4P. Michelin's (constant) cost of production for a set of five tires is 3. The production of one car requires a set of five tires and a bundle of inputs, which Toyota can obtain at a price of 6. Suppose first that Michelin and Toyota are just two departments within the same firm.
(a) What price would the firm charge for cars and how many cars would it produce? Suppose now that Michelin and Toyota are separate firms. Michelin quotes a price w for a set of five tires and Toyota decides how many sets to buy at that price.
(b) What price will Michelin set? How many cars will Toyota sell and at what price?
(c) Are consumers better off when Michelin and Toyota are an integrated firm [Part (a)] or when they are separate firms [Part (b)]?
Solutions
Rahul Sunny answered 1 year agoRelated Solutions
Suppose that Michelin is the only producer of tires and Toyota the only producer of cars....
Suppose that Michelin is the only producer of tires and Toyota
the only producer of cars. The demand function for cars is given by
Q = 40 − 4P. Michelin's (constant) cost of production for a set of
five tires is 3. The production of one car requires a set of five
tires and a bundle of inputs, which Toyota can obtain at a price of
6. Suppose first that Michelin and Toyota are just two departments
within the same...
Question (Double Marginalization) Suppose that Michelin is the only producer of tires and Toyota the only...
Question (Double Marginalization)
Suppose that Michelin is the only producer of tires and Toyota the
only producer of cars. The demand function for cars is given by Q =
40 − 4P. Michelin's (constant) cost of production for a set of five
tires is 3. The production of one car requires a set of five tires
and a bundle of inputs, which Toyota can obtain at a price of
6.
- Suppose first that Michelin and Toyota are just two...
Question (Double Marginalization) Suppose that Michelin is the only producer of tires and Toyota the only...
Question (Double Marginalization)
Suppose that Michelin is the only producer of tires and Toyota the
only producer of cars. The demand function for cars is given by Q =
40 − 4P. Michelin's (constant) cost of production for a set of five
tires is 3. The production of one car requires a set of five tires
and a bundle of inputs, which Toyota can obtain at a price of
6.
- Suppose first that Michelin and Toyota are just two...
Big O tires can sell 10,230 Michelin RG Tires per week nationally if the price is...
Big O tires can sell 10,230 Michelin RG Tires per week
nationally if the price is set at $85 per tire, but only 8,320
tires if the price is $105 each. Using a LINEAR demand model
1,At what price is the maximum revenue per week
achieved? nearest 1$
2.What is that maximum revenue per week? nearest
$1,000
3.How many tires will be sold each week at that optimal
price (nearest 10 tires)
Suppose you are the CFO of Toyota and that you manufacture your cars in Japan and...
Suppose you are the CFO of Toyota and that you manufacture your
cars in Japan and export the vehicles to the USA. Assuming your
current profit per car is $1,000 and you sell 10,000 this year,
please answer the following and show your computations:
- From a profitability point of view, do you generally
favor a strong or weak US Dollar versus the Japanese YEN?
Why?
- If the exchange rate is 1 US Dollar = 1.20 Japanese...
Suppose that MUB is the only producer of electricity in the little town of Microeconomica. The...
Suppose that MUB is the only producer of electricity in the
little town of Microeconomica. The faces a demand curve of the
form: P = 210 – 4Q, where P (measured in dollars) and Q (measured
in kilowatts) stand for the unit price and quantity of electricity
produced, respectively. Suppose that in producing electricity for
the town, MUB incurs production costs that total C(Q) = 5Q.
a. What is MUB’s marginal cost function?
b. How many kilowatts of electricity should...
The Toyota Camry is one of the best-selling cars in North America. The cost of a...
The Toyota Camry is one of the best-selling cars in North
America. The cost of a previously owned Camry depends on many
factors, including the model year, mileage, and condition. To
investigate the relationship between the car’s mileage and the
sales price for Camrys, the following data show the mileage and
sale price for 19 sales (PriceHub web site, February 24, 2012).
Miles (1000s)
Price ($1000s)
22
16.2
29
16.0
36
13.8
47
11.5
63
12.5
77
12.9
73
11.2...
The Toyota Camry is one of the best-selling cars in North America. The cost of a...
The Toyota Camry is one of the
best-selling cars in North America. The cost of a previously owned
Camry depends upon many factors, including the model year, mileage,
and condition. To investigate the relationship between the car’s
mileage and the sales price for a 2007 model year Camry, the
following data show the mileage and sales price for 19 sales
(PriceHub website, February 24, 2012). Suppose that you are
considering purchasing a previously owned 2007 Camry that has been
driven...
The Toyota Camry is one of the best-selling cars in North America. The cost of a...
The Toyota Camry is one of the best-selling cars in North
America. The cost of a previously owned Camry depends on many
factors, including the model year, mileage, and condition. To
investigate the relationship between the car’s mileage and the
sales price for Camrys, the following data show the mileage and
sale price for 19 sales (PriceHub web site, February 24, 2012).
Miles (1,000s)
Price ($1,000s)
22
16.2
29
16.0
36
13.8
47
11.5
63
12.5
77
12.9
73
11.2...
The Toyota Camry is one of the best-selling cars in North America. The cost of a...
The Toyota Camry is one of the best-selling cars in North
America. The cost of a previously owned Camry depends on many
factors, including the model year, mileage, and condition. To
investigate the relationship between the car’s mileage and the
sales price for Camrys, the following data show the mileage and
sale price for 19 sales (PriceHub web site, February 24, 2012).
DATA
Miles (1,000s) Price ($1,000s) 22 16.2 29 16.0 36 13.8 47 11.5
63 12.5 77 12.9 73...
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