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Unformatted text preview: The Mexican plants has a marginal cost function given by MC M (Q M ) =1 + 0.5Q M. a) Find Gillettes profit-maximizing price and quantity of output for the Mexican market overall. How will Gillette allocate production between its Mexican plant and its U.S. plant? b) Suppose Gillettes L.A. plant had a marginal cost of 10 cents rather than 8 cents per blade. How would your answer to part (a) change? 3) Bolivian National Airlines is the only airline to make trips from City A to City B. The demand by type K consumers is X K =32-1/2P K X. The demand for type R consumers is X R =42 P R X . The marginal cost is $4. a) What is the profit-maximizing price-quantity combination in each market if Bolivian Air is able to use price discrimination? b) How much profit can it make from price discrimination? c) How much output will it produce and what price will it charge if it cannot use price discrimination? d) How much profit can it earn without price discrimination?...
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- Fall '07