Reference no: EM13454225

The Pear Computer Company just developed a totally revolutionary new personal computer. It estimate that it will take competitors at least two years to produce equivalent product. The demand function for the computer is estimated to be

                 P = 2,500 - 0.0005Q

The marginal ( and average variable) cost of producing the computer is $900

a. Compute the profit maximizing price and output levels assuming Pear acts as a monopolist for its product

b. Determine the total contribution to profit and fixed costs from the solution generated in part (a)

Pear Computer is considering an alternative pricing strategy of price skimming. It plnas to set the following schedule of price over the coming two years:

Time Period                           Price                                              Quantity Sold

1                                          $2,400                                  200,000

2                                            $2,200                                200,000

3                                            $2000                                 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

9                                            $1,300                                 200,000

10                                          $1,200                                  200,000

c. Calculate the contribution to profit and overhead for each of the 10 time periods and prices.