# , by how much should you expect your profits to change?

## You are the manager of a firm that competes against four other firms

You are the manager of a firm that competes against four other firms

Question
# 1

You are the manager of a firm that competes

against four other firms by bidding for government contracts
. While you believe

views the products as identical and purchases from the firm offering the best

price
. Total government demand is
Q= 1100 -5
Pand all five firms produce at a

constant marginal cost of \$80
. For security reasons, the government has imposed

restrictions that permit a maximum of five firms to compete in this market;

thus entry by new firms is prohibited
. A member of Congress is concerned

because no restrictions have been placed on the price that the government pays

for this product
. In response, she has proposed legislation that would award

each existing firm 20 percent of a contract for 600 units at a contracted price

of \$100 per unit
. If this legislation is passed, by how much should you expect

Instruction:If you expect

profits to fall, enter a negative number
.

\$

#2

PC Connection and CDW are two online retailers

that compete in an Internet market for digital cameras
. While the products they

sell are similar, the firms attempt to differentiate themselves through their

service policies
. Over the last couple of months, PC Connection has matched

CDW’s price cuts, but has not matched its price increases
. Suppose that when PC

Connection matches CDW’s price changes, the inverse demand curve for CDW’s

cameras is given by
P= 1,500 – 3
Q.When it does not match price changes,

CDW’s inverse demand curve is
P= 1,200 -0
.5
Q.Based on this information, determine

CDW’s inverse demand function over the last couple of months
.

P =–Q if Q ≤ 120

–Q if Q ≥ 120

Over what range will changes in marginal cost

have no effect on CDW’s profit-maximizing level of output?

\$to \$

You are the manager of a firm that competes against four other firms

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