18-Daytime2023ME
.pdf
keyboard_arrow_up
School
Duke University *
*We aren’t endorsed by this school
Course
101
Subject
Economics
Date
Jan 9, 2024
Type
Pages
11
Uploaded by ElderDangerArmadillo2072
MGRECON - Fall 2023
Online Assignment 4
due by Wed, 09/20, 11:59 pm
MGRECON - Fall 2023
⋄
Online Assignment 4
1. Dupont invented and patented Kevlar, a superstrength synthetic fiber.
It has a number of end use
applications including tire belts, bullet-resistant vests, cables, aircraft components, and so on. Dupont
charged different prices to different end users and contractually prohibited resale. There are no capacity
constraints. Suppose that at the profit-maximizing prices, the elasticity of demand for Kevlar (Market 1)
for end use in aircraft components is
−
1
.
3 and for end use in tire belts (Market 2) is
−
5. Marginal cost
for Dupont is constant at
5 per unit output. What prices did Dupont charge for each end use?
A.
P
1
= $31
.
45
and
P
2
= $9
.
1
B.
P
1
= $13
.
7
and
P
2
= $8
.
26
C.
P
1
= $21
.
67
and
P
2
= $6
.
25
D. none of the above
page 2 of 11
MGRECON - Fall 2023
⋄
Online Assignment 4
For questions
2
-
4
use the following information.
You have been hired by the software company Bug-Free Solutions (BFS) to provide advice for their pricing.
The company’s best selling application currently comes in 3 levels of quality:
basic
,
medium
and
best
. After
much legwork, you have determined that BFS has three types of customers, whose willingness to pay for each
quality
increment
is listed in the following table:
MWTP
Units
1
2
3
Group size
Type 1
125
50
20
22 000
Type 2
100
30
5
54 000
Type 3
70
20
0
30 000
The last column indicates the number of buyers of each type. The first 3 columns indicate the willingness to pay
for each quality
increment
. For example, each buyer of type 2 is willing to pay a total of $100+$30+$5 = $135
for the best quality version of the application.
The buyers’ types are not observable; therefore all BFS can do is offer a menu of price-quality pairs and let
each buyer select one that the buyer likes best.
The cost of developing the application is sunk, thus you
should aim to maximize BFS’s revenue.
2. What quality levels should BFS offer, and at what prices?
A. basic at $70, medium at $100 and best at $120
B. medium at $130 and best at $150
C. best only, at $195
D. basic only, at $90
page 3 of 11
MGRECON - Fall 2023
⋄
Online Assignment 4
For questions
2
-
4
use the following information.
You have been hired by the software company Bug-Free Solutions (BFS) to provide advice for their pricing.
The company’s best selling application currently comes in 3 levels of quality:
basic
,
medium
and
best
. After
much legwork, you have determined that BFS has three types of customers, whose willingness to pay for each
quality
increment
is listed in the following table:
MWTP
Units
1
2
3
Group size
Type 1
125
50
20
22 000
Type 2
100
30
5
54 000
Type 3
70
20
0
30 000
The last column indicates the number of buyers of each type. The first 3 columns indicate the willingness to pay
for each quality
increment
. For example, each buyer of type 2 is willing to pay a total of $100+$30+$5 = $135
for the best quality version of the application.
The buyers’ types are not observable; therefore all BFS can do is offer a menu of price-quality pairs and let
each buyer select one that the buyer likes best.
The cost of developing the application is sunk, thus you
should aim to maximize BFS’s revenue.
3. Suppose that an advertising campaign would increase the number of type 3 customers (the group with
the lowest WTP) to 50 000. The sizes of the other two groups remain unchanged.
If the campaign takes place, what quality levels should BFS offer, and at what prices?
A. basic at $70 and best at $150
B. basic at $70, medium at $130
,
and best at $150
C. medium at $130 and best at $150
D. medium at $90 and best at $110
page 4 of 11
Your preview ends here
Eager to read complete document? Join bartleby learn and gain access to the full version
- Access to all documents
- Unlimited textbook solutions
- 24/7 expert homework help
Related Questions
Home - Netflix
C
T
connect
Rachel
Rachel
https://newconnect.mheducation.com
Pricing Fundamentals
ADIVISIV
LIVIN MI
consider in addition to PRODUCTION
COST that affects PRICE. There is one
other COMPETITOR focused on the
OUTDOOR ENTHUSIAST market, so
this COMPETITOR will be directly
challenging your efforts.
In addition, your MARGIN PER UNIT
must cover another set of important but
potentially large costs. To investigate
these additional costs, click on the
other tabs in the top navigational bar
and explore further. What are the major
elements of those other costs?
Channels and Segmentation
Channels and Advertising
Advertising and Segmentation
Cos
F
M
Distr
ODIO
H
arrow_forward
IceLess is an anti-icing solution sold in gallon plastic jugs. It is poured into the windshield washer bottle
of your car. Wash your windshield and the solution prevents the glass from icing over for about four
hours. Production incurs the following fixed and variable costs. It is priced initially at $5.50 per gallon.
1.
Fixed costs (per year)
Rent
Utilities
Managerial salaries
Flammability permit
Other fixed expense
Total fixed
$18000
13200
20000
12000
2400
$65600
Variable Costs per gallon
Glycol
FreezeFree 312
Mfg labor
Packaging
Inert ingredients
Advertising
Total
$1.50
.50
.20
.20
.60
.30
$3.30
What is the annual breakeven production quantity (use above data, show work)?
2. What revenue would the sale of the breakeven quantity for $5.50 per gallon generate?
3. The production department says 29000 gallons is its maximum production capability.
Management insists on earning $94400 above fixed costs. All costs are as given initially. What
price must be charged per gallon if only 29000…
arrow_forward
Price (dollars per unit)
$110
$100-
$90-
$80-
$70-
$60-
$50-
$40-
$30-
$20-
$10-
en.
Profit-maximization of your firm
MC ATC
MR
Q
Q
S
arrow_forward
The table below displays the cost and output per week (in EUR) of the company «Creativia» which produces community textile face masks.
Total Product Quantity
Total variable costs, Euro
0
0
250
350
450
450
650
600
750
750
800
950
830
1300
850
1800
Assume the price is EUR 4,00 and is constant at any quantity,
Calculate the profit at the profit-maximizing output and show the area of profit on the graph.
Determine below what price would the firm exit the market in the long run. Explain your answer.
arrow_forward
1. Calculate a breakeven point
Selling price per unit
$ 17
Fixed expenses
Selling & administrative
Interest expense
$ 130,000
$10,000
Variable expenses
Cost of goods sold
Selling & administrative
$ 4
$ 3
arrow_forward
$
300-
250
200
150
100
50-
04. What is the Total Fixed Cost at Q = 10?
#
O (a) $9
0
Q
0 2 4 6 8 10 12 14 16 18 20
O (b) $50
O (c) $90
(d) $140
O(e) $160
Type here to search
TC
Et
I
TVC
TFC
30
25
20
15
10
Click Save and Submit to save and submit. Click Save All Answers to save all answers.
5
SA
0-
0 2 4 6 8 10 12 14 16 182
O
Save All Answers
MC
AC
AVC
St
AFC
Q
?
Save and Submit
DEL
arrow_forward
PLEASEEE HELPPP
arrow_forward
cofee
1606936740515_short and long questions [Compatibility Mode] - Word
A rayda almamari
Layout
References
Mailings
Review
View
Help
O Tell me what you want to do
& Share
20
-A A Aa -
三,三,
O Find -
AaBbCcDc AaBbCcDc AaBbC AABBCCC AaB
I Normal 1 No Spac. Heading 1 Heading 2
c Replace
A Select -
abe X, x
A - ay- A -
Title
Sensitivity
Font
Paragraph
Styles
Editing
Sensitivity
1. List and discuss the three central problems of an economy.
Define opportunity cost. What is the opportunity cost to you of attendin
was your opportunity cost of coming to class today?
2.
Topic 1 (Long)
1.
arrow_forward
You are currently in a job as a chef in a restaurant earning $100,000 per year. You are considering opening up a restaurant in a building which you currently own. You estimate that, if you wanted to, you could rent out your building for $25,000 per year to another restaurant.
Last year, your revenues and expenses from the restaurant were the following:
Revenues $400,000Cost of Food $120,000Salaries/Wages $100,000Utilities $25,000Taxes $20,000
What is your accounting profit? Show your calculations
What is your economic profit? Show your calculations
Assuming that you are indifferent between being a chef or owning a restaurant, should you open up your restaurant? Explain why.
Now suppose that instead of owning the building where your restaurant will be located, you had to pay rent of $25,000 per year for the building. Will your answers to parts 1-3 change? Show your calculations. Explain how and why your answers will change or…
arrow_forward
What are the two types of manufacturing systems to produceits shaft couplings?
arrow_forward
what are Coasian transaction costs
arrow_forward
Expalin the advantages and disadvantages of the technology in the economical industry
arrow_forward
An electronics firm is currently manufacturing an item that has a variable cost Of .50 per unit. Please write the answers clearly I am 60 years old and hard for me to understand thank you. Please write out the steps
arrow_forward
What is the markup price for the Acme1 battery? HINT: Calculate markup price as Unit Cost/ (1-Markup%)
$30
$35.20
$42.50
$34
arrow_forward
Problem1:
A summer camp for youngsters has the following data:
Charge per camper (selling price)
Fixed costs
$144
$4800
Variable cost per camper
Capacity
1. Write the total revenue equation.
2. Write the total cost equation.
3. Determine the breakeven point in units.
4. Calculate the breakeven point in dollars.
5. If fixed costs decrease 10%, what is the new breakeven point in units and in dollars?
6. What is the profit or loss of the session if the camp operates at 80% capacity?
Problem 2:
A company is considering a capital cost of $80000 to acquire new machinery. The expected
annual revenue is $45000. After 6 years its salvage value will be $15000. An overhaul costing
$10000 will be needed in year 3. The operation and maintenance cost (O&M) will be $5000 per
year. Complete the corresponding table and cashflow diagram below.
a. Cash flow table
Year
0
1
2
3
4
5
6
$96
200 campers
Capital Cost Annual
Revenue
b. Cash flow diagram
O&M
Overhaul
Salvage
Cost
arrow_forward
Note: Do not use MATLAB or any other applications.
arrow_forward
Q
VC
AVC
TC
ATC
MC
$0
$0
$30
$0
$0
1
$40
$40
$70
$70
$40
2
$100
$50
$130
$65
$60
3
$180
$60
$210
$70
$80
4
$330
$82.5
$360
$90
$150
If the firm can sell its product for $60, it will not
sell 2 units and incur losses of $10
sell 1 unit and incur losses of $10
а.
b.
continue to operate in hopes the market price increases
shut down and incur losses of $30
с.
d.
arrow_forward
2
arrow_forward
3. Product A currently sells for $12 per unit. The variable cost is $4 per unit and 10,000 units
are sold annually and a profit of $30,000 is realized yearly. A new design of this product
will increase the variable cost by 20% and fixed cost by 10% but sales will increase to
12,000 units per year. At what selling price do the break even occurs for the new design?
arrow_forward
2. A local company assembling stereo
cassettes produces 300 units per month
at a cost of P 800 per unit. Each stereo
radio cassette sells for P 1,200. If the
firm makes a profit of 10% on its 1,000
shares with a par value of P 200 per
share, and the fixed costs are P 20
million per month.
(a) What is the break-even
point?
(b) How must is the loss or
profit if only 100 units are
produced in a given
month?
Answer: [(a) 50 units per month; (b) P
3,300 per month]
arrow_forward
Tennis Products, Inc., produces three models of high-quality tennis rackets. The following table contains recent information on the sales, costs, and profitability of the three models:
MODEL
AVERAGEQUANTITYSOLD (UNITS/MONTH)
CURRENTPRICE
TOTALREVENUE
VARIABLECOST PERUNIT
CONTRIBUTIONMARGIN PERUNIT
CONTRIBUTIONMARGIN*
A
B
C
Total
15,000
5,000
10,000
$30
35
45
$450,000
175,000
450,000
$1,075,000
$15.00
18.00
20.00
$15
17
25
$225,000
85,000
250,000
$560,000
*Contribution to fixed costs and profits.The company is considering lowering the price of Model A to $27 in an effort to increase the number of units sold. Based on the results of price changes that have been instituted in the past, Tennis Products’ chief economist estimates the arc price elasticity of demand to be –2.5. Furthermore, she estimates the arc cross elasticity of demand between Model A and Model B to be approximately 0.5 and between Model A and Model C to be approximately 0.2. Variable costs…
arrow_forward
Note:-
Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism.
Answer completely.
You will get up vote for sure.
arrow_forward
For a table manufacturing company, selling price for a
table is $188.00 per Unit, Variable cost is $28.00 per
Unit, rent is $4, 670.00 per month and insurance is $
271.00 per month. Company wants to expand its
business and improve the table quality, it wants to
increase the selling price for a table to $350.00 per Unit,
Variable cost to $48.00 per Unit, bigger area will have
rent $6, 537.00 per month and insurance is $406.00 per
month At what point will the company be indifferent
between the current mode of operation and the new
option?
arrow_forward
1. A steel bar manufacturer business can make 15000 bar a week. It is determined that to achieve this production, the company need to spend 90000 pesos weekly for materials, utilities and transportation. The manager also pays a fixed cost of 10000 pesos per week. HOW MUCH per steel bar should they sell to gain a profit of 40% of the total cost?
arrow_forward
Respond to the question with a concise and accurate answer, along with a clear explanation and step-by-step solution, or risk receiving a downvote.
arrow_forward
6. A small company manufactures a certain product. Variable costs are $20 per unit and fixed costs are $5,000.
The price-demand relationship for this product is P = -0.2D + 220, where P is the unit sales price of the product
and D is the annual demand. Find the breakeven quantity.
Total cost = Fixed cost + Variable cost
Revenue = Demand x Price
Profit = Revenue - Total cost
arrow_forward
10
arrow_forward
tise or nột to advertise
Suppose that Fizzo and Pop Hop are the only two firms that sell orange soda. The following payoff matrix shows the profit (in millions of dollars) each
company will earn depending on whether or not it advertises:
Pop Hop
Advertise Doesn't Advertise
Advertise
8, 8
15, 2
Fizzo
Doesn't Advertise
2, 15
11, 11
For example, the upper right cell shows that if Fizzo advertises and Pop Hop doesn't advertise, Fizzo will make a profit of $15 million, and Pop Hop will
make a profit of $2 million. Assume this is a simultaneous game and that Fizzo and Pop Hop are both profit-maximizing firms.
million if Pop Hop advertises and a profit of $
million if Pop Hop does not
If Fizzo decides to advertise, it will earn a profit of $
advertise.
million if Pop Hop does not
million if Pop Hop advertises and a profit of $
If Fizzo decides not to advertise, it will earn a profit of $
advertise.
TE Don Uenad orticoc Fizze makoc a hiabo nrefit RS R choeces
acer
arrow_forward
Plant sizes get larger as you move from ATC-1 to ATC-4.
Output
1,500
2,000
2,500
3,000
3,500
4,000
4,500
5,000
5,500
6,000
ATC-1
$ 10
8
9
12
15
18
20
24
29
35
ATC-2
15
12
10
8
6
10
12
15
19
25
ATC-3
$ 20
17
15
13
11
9
7
11
13
15
ATC-4
$ 30
25
20
18
16
14
12
10
8
9
In the long run, the firm should use plant size ATC-3 for what level of output?
arrow_forward
SEE MORE QUESTIONS
Recommended textbooks for you
Managerial Economics: Applications, Strategies an...
Economics
ISBN:9781305506381
Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher:Cengage Learning
Related Questions
- Home - Netflix C T connect Rachel Rachel https://newconnect.mheducation.com Pricing Fundamentals ADIVISIV LIVIN MI consider in addition to PRODUCTION COST that affects PRICE. There is one other COMPETITOR focused on the OUTDOOR ENTHUSIAST market, so this COMPETITOR will be directly challenging your efforts. In addition, your MARGIN PER UNIT must cover another set of important but potentially large costs. To investigate these additional costs, click on the other tabs in the top navigational bar and explore further. What are the major elements of those other costs? Channels and Segmentation Channels and Advertising Advertising and Segmentation Cos F M Distr ODIO Harrow_forwardIceLess is an anti-icing solution sold in gallon plastic jugs. It is poured into the windshield washer bottle of your car. Wash your windshield and the solution prevents the glass from icing over for about four hours. Production incurs the following fixed and variable costs. It is priced initially at $5.50 per gallon. 1. Fixed costs (per year) Rent Utilities Managerial salaries Flammability permit Other fixed expense Total fixed $18000 13200 20000 12000 2400 $65600 Variable Costs per gallon Glycol FreezeFree 312 Mfg labor Packaging Inert ingredients Advertising Total $1.50 .50 .20 .20 .60 .30 $3.30 What is the annual breakeven production quantity (use above data, show work)? 2. What revenue would the sale of the breakeven quantity for $5.50 per gallon generate? 3. The production department says 29000 gallons is its maximum production capability. Management insists on earning $94400 above fixed costs. All costs are as given initially. What price must be charged per gallon if only 29000…arrow_forwardPrice (dollars per unit) $110 $100- $90- $80- $70- $60- $50- $40- $30- $20- $10- en. Profit-maximization of your firm MC ATC MR Q Q Sarrow_forward
- The table below displays the cost and output per week (in EUR) of the company «Creativia» which produces community textile face masks. Total Product Quantity Total variable costs, Euro 0 0 250 350 450 450 650 600 750 750 800 950 830 1300 850 1800 Assume the price is EUR 4,00 and is constant at any quantity, Calculate the profit at the profit-maximizing output and show the area of profit on the graph. Determine below what price would the firm exit the market in the long run. Explain your answer.arrow_forward1. Calculate a breakeven point Selling price per unit $ 17 Fixed expenses Selling & administrative Interest expense $ 130,000 $10,000 Variable expenses Cost of goods sold Selling & administrative $ 4 $ 3arrow_forward$ 300- 250 200 150 100 50- 04. What is the Total Fixed Cost at Q = 10? # O (a) $9 0 Q 0 2 4 6 8 10 12 14 16 18 20 O (b) $50 O (c) $90 (d) $140 O(e) $160 Type here to search TC Et I TVC TFC 30 25 20 15 10 Click Save and Submit to save and submit. Click Save All Answers to save all answers. 5 SA 0- 0 2 4 6 8 10 12 14 16 182 O Save All Answers MC AC AVC St AFC Q ? Save and Submit DELarrow_forward
- PLEASEEE HELPPParrow_forwardcofee 1606936740515_short and long questions [Compatibility Mode] - Word A rayda almamari Layout References Mailings Review View Help O Tell me what you want to do & Share 20 -A A Aa - 三,三, O Find - AaBbCcDc AaBbCcDc AaBbC AABBCCC AaB I Normal 1 No Spac. Heading 1 Heading 2 c Replace A Select - abe X, x A - ay- A - Title Sensitivity Font Paragraph Styles Editing Sensitivity 1. List and discuss the three central problems of an economy. Define opportunity cost. What is the opportunity cost to you of attendin was your opportunity cost of coming to class today? 2. Topic 1 (Long) 1.arrow_forwardYou are currently in a job as a chef in a restaurant earning $100,000 per year. You are considering opening up a restaurant in a building which you currently own. You estimate that, if you wanted to, you could rent out your building for $25,000 per year to another restaurant. Last year, your revenues and expenses from the restaurant were the following: Revenues $400,000Cost of Food $120,000Salaries/Wages $100,000Utilities $25,000Taxes $20,000 What is your accounting profit? Show your calculations What is your economic profit? Show your calculations Assuming that you are indifferent between being a chef or owning a restaurant, should you open up your restaurant? Explain why. Now suppose that instead of owning the building where your restaurant will be located, you had to pay rent of $25,000 per year for the building. Will your answers to parts 1-3 change? Show your calculations. Explain how and why your answers will change or…arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- Managerial Economics: Applications, Strategies an...EconomicsISBN:9781305506381Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. HarrisPublisher:Cengage Learning
Managerial Economics: Applications, Strategies an...
Economics
ISBN:9781305506381
Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher:Cengage Learning