Author Question: One implication of the fact that profit functions are convex in prices is that firms will always ... (Read 128 times)

plus1 · **on:** Jul 1, 2018

One implication of the fact that profit functions are convex in prices is that firms will always prefer:
a. stable input and output prices.
b. input and output prices that fluctuate about a given level.
c. stable input prices and fluctuating output prices.
d. fluctuating input prices and stable output prices.

Question 2

A manufacturer produces two types of computer software, Word processing (W) and Spreadsheet (S), which is offered to two different retail outlets (1 and 2). The following table shows the maximum price each retail outlet is willing to pay for each individual software product. Product W Product S Retail 1 170 105 Retail 2 95 135 What is the optimal pricing strategy that will maximize revenue for the manufacturer, given the maximum the retail outlets are willing to pay?
a. Bundle both products (W and S) and sell them at 230.
b. Price product W at 170 and Product S at 135.
c. Price product W at 170 and Product S at 170.
d. Price product W at 95 and Product S at 105.
e. Bundle both products (W and S) and sell them at 275.