A downtown bar serves a drink that UCSB students love. The profit-maximizing owner knows that any given student has a demand for drink given by p= 14 -q and a non-student has demand p = 6- q. Because the bar can't identify whether a customer is a student, she decides to sell drinks in packages. She offers a large package of 12 drinks and a small package of 4 drinks, and each student is only allowed to buy one package. Resales are strictly prohibited. The bar's marginal cost is 2. If both packages are offered and priced optimally, what is the minimum surplus students must get from the large package in order to not want to buy the small package? O a. 64 O b. 32 O C. 26 od. 80
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- A decorator, who is a monopolist, makes two types of specialty picture frames. From experience, the decorator has determined that if x frames of the first type and y frames of the second type are made and put on sale in a showroom, they can be sold for (100 - 2x) dollars and (120 - 3y) dollars each, respectively. The total cost of constructing these frames is (12x + 12y + 4xy) dollars. How many frames of each type should be produced to realize the maximum profit. and what is the maximum profit? Make sure to verify that this is indeed a maximum.As a manager of a chain of movie theaters that are monopolies in their respective markets, you have noticed much higher demand on weekends than during the week. You therefore conducted a study that has revealed two different demand curves at your movie theaters. On weekends, the inverse demand function is P = 20 - 0.001Q; on weekdays, it is P = 15 - 0.002Q. You acquire legal rights from movie producers to show their films at a cost of $25,000 per movie, plus a $2.50 "royalty" for each moviegoer entering your theaters (the average moviegoer in your market watches a movie only once). What price should you charge on weekends? What price should you charge on weekdays?A manager of a nightclub realizes that demand for drinks is more elastic among students and is trying to determine the optimal pricing schedule. Specifically, he estimates the following average demand for his customer types: Under 25: q^r=18-5pOver 25: q=10-2p The two age groups visit the nightclub in equal numbers on average. Assume that drinks cost the club $2 to make. A) suppose that once again it is impossible to identify which group the customers belong. Suppose the manager lowers the price of drinks to equal to marginal cost and still wanted to attract both customers, what entry fee would the manager set?
- There are two types of consumers in Melbourne: students and non-students. The student population is 10, and each student’s demand of printing paper is Q=1−p, for p<1. The non-student population is 40, and each non-student’s demand of printing paper is Q=3−p, for p<3. Suppose OfficeMax is the only seller of printing paper in Melbourne. Assume zero production cost. OfficeMax introduces printing paper in smaller packages targeting the students. The non-students are willing to pay 5 for a smaller package and 7 for a standard package, and the students are willing to pay 3 for a smaller package and 4 for a standard package. If a consumer does not purchase, her utility is zero. Find all the prices, Pn for a smaller package and Ps for a standard package, so that the students choose the smaller packages and the non-students choose the standard ones.A firm faces two types of consumers. Consumer A has an inverse demand of P = 120-10 Q and consumer B has an inverse demand of P = 60-2Q. The firm has a constant marginal cost of $20. Assume the firm does not know which type a given consumer is. She offers to sell the good at a price of 70$ per unit. However, if the customer buys 10 or more units, she will offer a quantity discount and charge only 40$ per unit (including the first 10). Which consumer will use the price discount? Question 7 options: Neither costumer will purchase from this firm at all. Customer A will choose the quantity discount and customer B will not choose the quantity discount. Both consumers will chose the quantity discount. Neither of the two consumers will opt for the quantity discount. Instead, both will purchase at the higher price of 70 and buy less than 10 units each. Customer B will choose the quantity…Consider a buyer who, in the upcoming month, will make a decision about whether to purchase a good from a monopoly seller. The seller “advertises” that it offers a high-quality product (and the price that it has set is based on that claim). However, by substituting low-quality components for higher-quality ones, the seller can reduce the quality of the product it sells to the buyer, and in so doing, the seller can lower the variable and fixed costs of making the product. The product quality is not observable to the buyer at the time of purchase, and so the buyer cannot tell, at that point, whether he is getting a high-quality or a low-quality good. Only after he begins to use the product does the buyer learn the quality of the good he has purchased. The payoffs that accrue to the buyer and seller from this encounter are as follows: The buyer’s payoff (consumer surplus) is listed first; the seller’s payoff (profit) is listed second. Answer each of the…
- There are two types of consumers in Melbourne: students and non-students. The student population is 10, and each student’s demand of printing paper is Q=1−P, for P<1.The non-student population is 40, and each non-student’s demand of printing paper is Q=3−P, for P<3. Suppose OfficeMax is the only seller of printing paper in Melbourne. Assume zero production cost. Suppose OfficeMax cannot offer student discounts, and every customer has to pay the same price P. Derive the aggregate demand curve (for both students and non-students), and illustrate it in a diagram.As a manager of a chain of movie theaters that are monopolies in their respective markets, you have noticed much higher demand on weekends than during the week. You therefore conducted a study that has revealed two different demand curves at your movie theaters. On weekends, the inverse demand function is P = 20 − 0.001Q; on weekdays, it is P = 15 − 0.002Q. You acquire legal rights from movie producers to show their films at a cost of $25,000 per movie, plus a $2.50 “royalty” for each moviegoer entering your theaters (the average moviegoer in your market watches a movie only once). Devise a pricing strategy to maximize your firm’s profits.As a manager of a chain of movie theaters that are monopolies in their respective markets, you have noticed much higher demand on weekends than during the week. You therefore conducted a study that has revealed two different demand curves at your movie theaters. On weekends, the inverse demand function is P = 20 – 0.001Q; on weekdays, it is P = 15 – 0.002Q. You acquire legal rights from movie producers to show their films at a cost of $25,000 per movie, plus a $2.50 “royalty” for each moviegoer entering your theaters (the average moviegoer in your market watches a movie only once).
- There are two types of consumers in Melbourne: students and non-students. The student population is 10, and each student’s demand of printing paper is Q=1−p, for p<1.The non-student population is 40, and each non-student’s demand of printing paper is Q=3−p, for p<3. Suppose OfficeMax is the only seller of printing paper in Melbourne. Assume zero production cost. Suppose OfficeMax offers a student discount, $1, so students only pay $0.50 and non-students pay the full price, $1.50. What is the deadweight loss in this situation? What is the deadweight loss if there was no discount and both students and non-students share an optimal price of $1.30?In a small college town there is only one movie theater. In a given month, if the theater is open, the owners have to pay a fixed amount of $6,000 for the films, ushers, etc., regardless of how many people come to the movies. For simplicity, assume that if the theater is closed, its costs are zero. The demand function for movie tickets in the town is characterized by ??= 45−QT/60 a. Find the profit-maximizing price and quantity of movie tickets, and indicate them on the graph above. How much would the theater make in profits? b. Suppose the local government implements a property tax, so that each month the theater now must pay a lump sum tax of $700. What will be the price and quantity of movie tickets under this tax?A manager of a nightclub realizes that demand for drinks is more elastic among students and is trying to determine the optimal pricing schedule. Specifically, he estimates the following average demand for his customer types: Under 25: qr =18-5p Over 25: q=10-2p The two age groups visit the nightclub in equal numbers on average. Assume that drinks cost the club $2 to make. If the manager can charge a separate entry fee and a price per drink for each group, what two-part price will the manager set for reach group. Now suppose that once again it is impossible to identify which group the customers belong. Suppose the manager lowers the price of drinks to equal to marginal cost and still wanted to attract both customers, what entry fee would the manager set? Compare the profits earned in parts a) to d). Which scheme would you choose if you could not identify customer type and which would you choose if you could identify customer type.