Hi, please help! Please provide detail solution of how you get this answer! Than

Question

Hi, please help! Please provide detail solution of how you get this answer! Thanks!

Also, let me be clear, the answer for the below two is not 3.15 and 0.35 million, so do not use this wrong answer to answer my question again.

Map Blue Sun enjoyed a monopoly on chocolate eggs before Reynold's Wrappers entered. Now their market share has dropped to 90% with Reynold's Wrappers controlling 10% 10 To the right is the demand curve for this market, showing the number of boxes of chocolate eggs demanded each month Currently, the market is at point A, demanding 3.5 million boxes Enter all answers in millions to 2 decimal places Price (S) It costs either firm $4 to produce one box. What is Blue Sun's profit per month? emand Number million 0 1 2 3 4 5 6 7 8 9 10 11 12 13 Quantity of boxes (millions) To defend its position, Blue Sun is thinking of cutting the price to $1 to drive Reynold's Wrappers out of business Such a price cut would be predatory pricing Assume the firms would retain the same market share How much would Blue Sun lose per month (enter answer as a positive number)? If Reynold's Wrappers matches this price cut, how much would it lose per month? Number Number million million Tools

Explanation / Answer

Total demand 3.5 million

Blue sun share is 90% means he is producing 3.5*90% = 3.15 and the cost is $4 for producing one box i.e, (3.15*4) =$12.6 is the total cost.

Blue sun profit = P*3.15 - $12.6

Here accoeacco to diagram price is $7

So profit will be 7*3.15 - 12.6 =$9.45 million.

- it is correct that such a price cut is predatory pricing

Now after price become $1.

Now at this price according to the diagram, demand is 11 boxes.

Market share is same so blue sun will produce (11*90%) = 9.9 boxes.

Now the profit will be = 1*9.9 - 4*9.9 = -29.7

So after cutting price to $1, blue sun will lose $29.7 million per month.

After price cut, Reynolds's share will be 11*10% = 1.1 boxes

If Reynolds's wrappers wants to match this price cut, it would lose:

1.1*1 - 1.1*4 = 3.3 million = 0.033 x 102 million.

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