1. One time your company needs cash and plans to auction off subsidiaries to the highest bidder. Mention the type of auction that will maximize your company\'s revenue from the sale if:
a. Bidder is neutral on risk and has independent personal judgment?
b. Bidder is risk-neutral and has an affiliated valuation estimate?

2. A manager will use a business strategy so that in the long run the company\'s profits will increase. The entry of competitors has an impact on the unfavorable profitability of the company. To deal with the entry of new competitors, a manager can consider the limit pricing strategy.
a. Explain what is meant by limit pricing!
b. How can the limit pricing strategy be effective?

3. It is known that the demand function of "I like" brand dry food companies in the monopolistic competition market is P = 100 - 2Q, while the cost function is TC = 5 + 2Q. in this case P = price level, Q = output level, and TC = total cost.
a. Determine the combination of prices and production levels that maximize company profits! 

 

b. Calculate the profit the company makes!