11. John Motors is the dominant used-car dealer in Macau. After paying $50,000 for overhead, John...

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11. John Motors is the dominant used-car dealer in Macau. After paying $50,000 for overhead, John Motors's cost per car is $500. There are 5 other small used-car lots in this town, but since they are not large enough to purchase cars through the same discount sources as John, each firm faces the cost function c(y) = 5,000+ 700y+5y. The demand for used cars is y(p) = 500 - p/10. Assuming John is aware of his competitors' costs, what price should John set for a used car? [14 marks] 11. John Motors is the dominant used-car dealer in Macau. After paying $50,000 for overhead, John Motors's cost per car is $500. There are 5 other small used-car lots in this town, but since they are not large enough to purchase cars through the same discount sources as John, each firm faces the cost function c(y) = 5,000+ 700y+5y. The demand for used cars is y(p) = 500 - p/10. Assuming John is aware of his competitors' costs, what price should John set for a used car? [14 marks]

Answer rating: 100% (QA)

Answer John Motors as the dominant dealer can influence the market price due to their lower costs We can find the optimal price by considering two steps Competitors Equilibrium Price First lets find t... View the full answer