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Question

Assignment2: Quantitative Exercises

Your consulting firm was justgranted an exclusive contract for your state. You now must decide your pricingpolicy, given the following relationships:

P= $1400 - 0.0004Q

 

MR = $1400 - 0.0008Q

 

AVC = $1000

where P is the price, Qthe quantity, and AVC the average variable cost.

The firm will encounter no fixedcosts, and all revenue is after taxes. As your firm has been granted anexclusive contract, your pricing and output decisions will be those of amonopolist.

Tasks:

1. Using the data above, calculate the output the firm will provide.
2. Determine the price at this output level.
3. Complete the Microsoft Excel Template given below using the data in the problem.
4. Check whether your data is consistent with your calculations in question 1. Why or why not?
5. Now assume that the state decides to give as many contracts as it can for the same activity, so your firm is now operating in a perfectly competitive market. How will your price and output decisions change? Explain the differences and why these changes happened.

Click here to download the Microsoft Excel Template for this week.

 

Submission Details:

• Compile your calculations and graph in a Microsoft Excel spreadsheet named as SU_MBA5004_W4_A2_LastName_FirstInitial.xls and your analysis in a Microsoft Word document named as SU_MBA5004_W4_A2_LastName_FirstInitial.doc.

  By Tuesday, September 1, 2015, submit these documents to the W4 Assignment 2 Dropbox.