40 Profr Max PQ 30 25 Sales Max P.O 20 15 Scratch TR/Prof 10 MR 0 5 10 1520 2530

Question

40 Profr Max PQ 30 25 Sales Max P.O 20 15 Scratch TR/Prof 10 MR 0 5 10 1520 253035 40 QUANTITY (DVDs per day) Fill in the foilowing table with the price and quantity the firm chooses when it aims to maximize profit versus sales. (Hint: You may use the purpie point (diamond symboi) and green point (triangle symboi) to heip you derive this answer. You will not be graded on where you place these points on the graph.) Under Profit Maximization Under Sales Maximization Price Quantity Total Revenue price and produce- If a firm aims to maximize sales revenue, it will charge a maximization output than under profit Using the tan profit and total revenue scratch rectangle, compute the profit and total revenue the firm earns under profit maximization versus sales maximization and enter it in the preceding table

Explanation / Answer

1) If Flashfone prices high, Pitch will make more profit if it chooses a Low price because it will give him a payoff of $ 18 which is greater than $ 11.

2) Low price because the payoff of $ 10 is greater than the payoff of $ 2.

3) If Pictech prices high, Flashfone will make more profit if it chooses a Low price because it will give him payoff of 18 which is greater than 11.

4) Low price because the payoff of $ 10 is greater than the payoff of $ 2.

5) Pricing high is not the dominant strategy for both.

6) Both Flashfone and Pictech will choose a low price.

7) False. Prisonner’s dilemma is there.

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