MegaSports, Inc

question 27

Essay

MegaSports, Inc. produces two high-priced metal baseball bats, the Slugger and the Launcher, that are made from special aluminum and steel alloys. The cost to produce a Slugger bat is $100, and the cost to produce a Launcher bat is $120. We can not assume that MegaSports will sell all the bats it can produce. As the selling price of each bat model -- Slugger and Launcher -- increases, the quantity demanded for each model goes down.
Assume that the demand, S, for Slugger bats is given by S = 640 - 4P_S and the demand, L, for Launcher bats is given by L = 450 - 3P_L where P_S is the price of a Slugger bat and P_L is the price of a Launcher bat. The profit contributions are P_S S - 100S for Slugger bats and P_L L - 120L for Launcher bats. Develop the total profit contribution function for this problem.

Analyze the impact of price discrimination on monopolist's profits and consumer surplus.

Distinguish between different market structures including perfect competition, monopolistic competition, oligopoly, and monopoly.

Identify the effects of barriers to entry on market structures and competition.

Understand the relationship between economies of scale, natural monopolies, and market control.

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Definitions:

Production Costs

Production costs are the expenses incurred in the process of creating a product or service, including raw materials, labor, and overhead costs.

Circular Flow Diagram

A visual model that shows how goods, services, and money move through an economy in a circular manner between households and firms.

Firms

Business organizations or entities engaged in commercial, industrial, or professional activities with the goal of generating profits.

Resource Market

Markets where resources (or factors of production) like labor, capital, and raw materials are bought and sold.