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The Pear Computer Company just developed a totally revolutionary new personal computer. Pear estimates that it will take competitors at least two years to produce equivalent products. The demand function for the computer is estimated to be P=2,500-500Q   where QQ is millions of computers. The marginal (and average variable) cost of producing the computer is $900. Assuming Pear acts as a monopolist in its market, the profit-maximizing price and output levels are $           per computer and                million computers, respectively. The total contribution to profits and fixed costs at this output level is $                  million.

- November 14, 2022 - Edwin Tunner

The Pear Computer Company just developed a totally revolutionary new personal computer. Pear estimates that it will take competitors at least two years to produce equivalent products. The demand function for the computer is estimated to be

P=2,500-500Q

 

where QQ is millions of computers. The marginal (and average variable) cost of producing the computer is $900.

Assuming Pear acts as a monopolist in its market, the profit-maximizing price and output levels are $           per computer and                million computers, respectively. The total contribution to profits and fixed costs at this output level is $                  million.

 

 

Time Period                  Price                     Units sold                 Total Contri.

1 2,400    
2 2,200    
3 2,000    
4 1,800    
5 1,700    
6 1,600    
7 1,500    
8 1,400    
9 1,300    
10 1,200    

Over the 10 periods, the total contribution to profits and fixed costs from price skimming is $          million.

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