In 2015, Apple introduced the Apple Watch. Assume that the cost of producing the 38mm Apple Watch Sport was $84. The price was $321. What was Apple's price/marginal cost ratio? What was its Lerner Index? If Apple is a short-run profit-maximizing monopoly, what elasticity of demand did Apple believe it faced? Part 2 Apple's price/marginal cost ratio was enter your response here. (Enter your response rounded to two decimal places.)
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In 2015, Apple introduced the Apple Watch. Assume that the cost of producing the 38mm Apple Watch Sport was $77. The price was $332. What was Apple's price/marginal cost ratio? What was its Lerner Index? If Apple is a short-run profit-maximizing monopoly, what elasticity of demand did Apple believe it faced? Apple's price/marginal cost ratio was ________ (Enter your response rounded to two decimal places).
Azat N.
According to iSuppli (HIS) in 2010 , its sixthgeneration iPod nano's marginal cost is about $\$ 45$ while its price is about $\$ 150 .$ What is Apple's price/ marginal cost ratio? What is its Lerner Index? If we assume (possibly incorrectly) that Apple acts like a short-run profit-maximizing monopoly in pricing its iPod Shuffle, what elasticity of demand does Apple belicve it faces? (Hint: See Solved Problem $11.3 .)$ A
Monopoly
Market Power
QAW = -150,000 - 2400PAW + 1520PG + 1200PP - 1200PiPhone + 44A Where: QAW is the quantity of Apple Watches sold per week; PAW is the price of an Apple Watch in dollars per unit; PG is the price of Samsung Gear smartwatch in dollars per unit; PP is the price of the Pebble Steel smartwatch in dollars per unit; PiPhone is the price of an iPhone; A is the quarterly advertising budget for Apple Watch in thousands of dollars. Answer the following questions: How many watches will Apple sell if PAW = $349, PG = $380, PP = $220, PiPhone = $299, and A = $15,500? What is the price elasticity of demand for Apple Watch? What are the cross-price elasticities between the Apple Watch and the two other smartwatches, Gear and Pebble? What is the advertising elasticity for the Apple Watch? Interpret the meaning of each of the elasticities you calculate. What additional information would you need in order to determine if $349 is the appropriate price for the Apple Watch?
Madhur L.
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