Econ question

1. Fred Kruger has written a new book. His publisher. Norton. estimates that demand for this book in the United States is (:1 = 50.000 2.000% where .01 is measured in US dollars. Demand for Sludge's book in England is q; = 10,000 500p2. where p; is its price in England, also measured in US dollars. His publisher has a cost function in dollars of C = 50.000 + 2q. where q is the total number of copies of the book that it produces. (a) If Norton must charge the same price in both countries. how many copies should it sell? What price should it charge to maximize its profits? Calculate Norton's profits. (b) If Norton can charge a different price in each country and wants to maximize profits, how many copies should it sell and what price should it charge in the United States? How many copies should it sell and what price should it charge in England? Calculate Norton's profits. 2. Suppose you are a pricing analyst for MegaDat Corporation. a firm that recently developed a new software program for data analysis. You have two types of clients who use your product. Type-A's inverse demand for your software is P = 120 10Q. where Q represents the number of users and P is in dollars per user. Type-B's inverse demand is P = 60 2Q. Assume that your firm faces a constant marginal cost of $20 per user to install and set up this software. (a) If you can tell which type of buyer is buying the product before a purchase is made, what prices will you charge each type? (b) Suppose instead that you cannot tell which type of buyer the client is until after the purchase. Suggest a possible way to use quantity discounts (ie. offering a lower per-unit price on all units purchased if someone chooses to by above a certain quantity) to have buyers self-select into the pricing scheme set up for them. (c) Determine whether the pricing scheme you determined in part (b) is incentive-compatible. 3. Bob and Ron's Stereo sells televisions and DVD players. They have estimated the demand for these items and have determined that there are three consumer types (A. B, and C) of equal number (assume one of each type for simplicity) that have the following reservation prices (i.e., maximum willingness to pay) for the two products. Bob and Ron's cost for a TV is 90 and for a DVD player is 90. It will cost Bob and Ron 180 to produce a bundle of one TV and one DVD player. Consumer TV DVD Player A 280 120 B 290 40 C 300 100 Any consumer's reservation price for a bundle of one TV and one DVD player is the sum of their reservation prices for each item. Consumers will demand (at most) one TV and one DVD player. (a) If Bob and Ron only consider pricing each item separately. pricing a pure bundle, or pricing a mixed bundle as their pricing policy. what price(s) would maximize their profit and what would be their profit? (b) If Bob and Ron were able to perfectly price discriminate (that is charge different prices to different consumers), how much would their profit increase over their optimal profit in part a