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ugon #1 (4 points) You are a manager at Pacic Computer Inc. Recently your company decided to launch a server, called Pacicl, at a price

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ugon #1 (4 points) You are a manager at Pacic Computer Inc. Recently your company decided to launch a server, called Pacicl, at a price of $2,000 (Assume that this price would not be changed). In the market, the existing and dominant server is HIMA, produced by Himalayas Inc. The price of I-IIIVIA is $1,700. Suppose that it is unlikely for Himalayas Inc. to change that price in any case. After conducting tests in the labs, you found that the performance of Pacic 1 is the same as that of HINIA for customers. That is perhaps why it has been difcult for your product to attract consumers away from Himalayas Inc. There are two types of customers in the market. Each year the total demand from Type 1 customers for HIMA servers is 400, and the demand from Type 2 customers for HIMA servers is 400 as well. Just now, some software developers in your division told you that they had developed one software, which would be compatible with Pacic 1 but not with HIMA. The variable cost for you to produce one copy of the software is pretty low and can be ignored. For Type 1 customers, Pacic] loaded with the software would perform twice faster. That is, a business customer could receive the same performance by buying one Pacicl loaded with the software as compared to buying two l-[[MA servers. For Type 2 customers, Pacic I loaded with the software would perform four times faster than HIMA servers. Thus, in total each type of customers can buy fewer servers if they use Pacic 1 together with the software. For a typical business customer, in addition to costs purchasing servers, other costs (not dependent on whether a server is loaded with the new software) include electricity (about $500 per server each year for any server), licensing fees to get other applications (about $750 per server each year), and labor such as hiring server administrators (about $2000 per server each year). For simplicity, in your analysis, assume that each server is only used for one year. Also note that, before we have the new software, the two servers have the same performance. But the price of I-IEMA is lower. All customers purchased I-[[MA in the past. Given the above information, to maximize your prots, what is the highest possible price that you could charge for each license of the new software? Note that each license allows customers to install the software only on one server for one year. Would your answer depend on the costs to produce each unit of the server Pacic]? Question #2 (2 points) For the case on "Subsidies and Global Cotton Trade, " construct a "linear" demand curve for the global cotton market in 2003-2004. To simply our analysis, ignore the inventory changes. Assume that, in 2003-2004, the global market price of cotton was $0.68/lb and the total quantity demanded for cotton was about 64.7 billion lbs. Also note that the short-run price elasticity of demand for cotton was 0.60. Based on the above information, construct the linear demand curve. Here is some hint

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