1. [5 points) Inmost cities all lumber yards advertise that they have the lowest price in town. In addition, they oen claim that they will match the prices of any other lumber yards. Will this form of competition bring about constantly lowering prices and zero economic prots for rms? Please explain. 2. [5 points) The American Baker's Association reports that annual sales of bakery goods last year rose 15 percent, driven by a 50 percent increase in the demand for bran mufns. Most of the increase was attributed to a report that diets rich in bran help prevent certain types of cancer. You are the manager of a battery that produces and packages gourmet bran mufns, and you currently sell bran mufns in packages of three. However, as a result of this new report, a typical consumer's inverse demand for your bran mufns is now P = 3 - 1.5Q. If your cost of producing bran mufns is C(Q) = 0.5Q (MC = 0.3), determine the optimal number of bran mufns to sell in a single package and the optimal package price. Please show all calculations and give any necessary explanation. 3. (5 points) A computer hardware firm sells both laptop computers and printers. It has a large inventory of laptops and printers that it wants to sell, so it has not variable production cost. The firm has determined that there are three type of consumers for its products Laptop Printer Bundle (Laptop + printer) _::o mo Customer type B $1, 000 To simplify the analysis, you may assume that there is one customer of each type. (a) If the firm were to charge only individual prices and not the bundle price, what price should it charge for its laptops and what price should it charge for its printers inorder to maximize revenue? Assume that the firm has one customer of each type. Please explain. (b) If the laptop and printer are bundled together, what price will the firm charge for the bundle in order to maximize revenue? Assume that only the bundle is sold and the laptop and printer are not available separately. Please explain. (c) Assume that the laptop and the printer are bundled together, and the laptop is available separately for $500 and the printer is available separately for $100. What will the bundle price now be in order to maximize revenue? Please explain. 4. [5 points) Refer to the gure below P "' MC Q1 Q2 Q3 Q (a) What is the capacity of this rm? (b) 1What price and quantity will the firm charge during low demand (off-peak) times? (c) What price and quantity will the firm charge during high demand {peak} times