Question: 5. MacroTough ('MT), a software company, sells WebPredate, a program for browsing the World Wide Web. MT sells this program to two types of customers,


5. MacroTough ('MT"), a software company, sells WebPredate, a program for browsing the World Wide Web. MT sells this program to two types of customers, corporations (through direct sales) and individuals (through stores). Producing WebPredator entails a fixed cost of $100,000, with a constant marginal cost of $5. MacroTough's CEO, Ima Shark, has hired you as a new MBA, and you first job is to advise prices and quantities MT should setfor sales to corporate (C) and individual (I) customers. Demand for WebPredator byeach group of customers is given by. Q , = 16,000- 400-P, and Q, =5,000 -100-P,. The total market demand curve, derived bybonzonal summation of both of the above demand curves, is If P = 40, Qu = 5,000 - 100-P (in other words, ody individuals purchase) If P = 40, Q. = 21,000 -500-P (in other weds, both types purchase for F = 40). a. What quantity should MT sell, and at what price, in each market? What would be MT's total profits? b. If MT were forced by the Justice Department to sell WebPredator at the same price to both types of customers, what warild be the price, quantity sold, and profits to MI? c. Discuss possible strategies MT could employ to prevent arbitrage between the two different types of customers if it employed the pricing strategy you analyzed in part a
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