The Pear Computer Company has just developed a totally revolutionary new persona
ID: 1244553 • Letter: T
Question
The Pear Computer Company has just developed a totally revolutionary new personal computer. It estimates that it will take competitors at least two years to produce equivalent products. The demand function for the computer has been estimated to be P = 2,500 - 0.0005Q. The marginal cost of producing computers is constant at $900. Pear Computer is considering an alternative pricing strategy of sliding down the demand curve. It plans to set the following schedule of prices over the coming two years.
Time Period<?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" /?>
Price
Quantity Sold
1
$2,400
200,000
2
2,200
200,000
3
2,000
200,000
4
1,800
200,000
5
1,700
200,000
6
1,600
200,000
7
1,500
200,000
8
1,400
200,000
c. Calculate the contribution to profit and overhead for each of the eight time periods.
Time Period<?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" /?>
Price
Quantity Sold
1
$2,400
200,000
2
2,200
200,000
3
2,000
200,000
4
1,800
200,000
5
1,700
200,000
6
1,600
200,000
7
1,500
200,000
8
1,400
200,000
Explanation / Answer
profit for time period 1=200000(2400-900)=300000000 2=260000000 3=220000000 4=180000000 5=160000000 6=140000000 7=120000000 8=1000000000
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