How can we be sure that the price P is the same for all vehicles? Why can’t sellers with excellent cars not simply advertise their high car quality and charge higher prices?
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- The demand equation for the Widget Company has been estimated to be: Q = 20,000 + 10 I - 50P + 20 PC where Q = monthly number of widgets sold, I = average monthly income, P = price of widgets, and PC = average price of competing goods. If next month's income is forecast to be 2,000, the price of competing goods is forecast to be $20, and the price of widgets will be set at $30, forecast sales. b. What will sales be if the price is dropped to $20?Suppose there are lemon (used) cars worth every price from ZMW1,000 to ZMW3000 to new owners, with each price equally likely. Further you expect that a car worth X to a new owner is worth 0.75X to its current owner. Suppose that there is a finite supply of cars at each price, while there is a much larger number of potential buyers (so the equilibrium price is the valuation of the potential buyer). Lastly assume that the quality of the car is unknown to potential buyers, due to information asymmetry. (a) Calculate the equilibrium price and average quality of cars sold. (b) Which cars are sold and which ones are not? (c) Is the equilibrium efficient?Suppose that the Long-Life Health Insurance Firm charges $5,000 annually for a family insurance policy. An advisor suggests that the company raise the annual price to $6,000 to increase its profits. If the firm followed this suggestion, what economic problem might arise? Would the firm’s pool of customers tend to become more or less healthy on average? Would the company’s profit necessarily increase?
- 1.The price p in dollars of a certain commodity and the quantity x sold obey the demand equation p= -1/5 + 200 where 0<=x <=1000. Suppose that the cost C in dollars of producing x units is C= the square root of x divided by 10 + 400. Assuming that all items produced are sold, find the cost of c as a function of the price p. 2. The value V of a vehicle is v(t)= 420,000(0.965)^t. What would be the car's worth in 2 years? In how many years would the car be worth $325,000?Consider the online learning problem with demand learning. The firm sells a product without any historical demand information. In each period, the firm can set a price and would observe a demand based on the charged price. Suppose the true demand function in each period is D(p) = 9−3p+ϵ, where ϵ is a random variable with zero mean. The marginal cost is negligible. (a) What price should the firm charge if you know the demand function? What would be the expected revenue if the firm implements this price for n periods? (b) Suppose you do not know the demand function, but know that the demand is a linear function, and the slope is 3. In other words, you know that demand is D(p) = a − 3p + ϵ and would like to estimate a from the data. Suppose from the historical data, you have k pairs of demand and price, i.e., (p1, D1),(p2, D2), ...,(pK, DK). Suppose you would like to minimize the residual sum of square, i.e., min a X K i=1 (Di − a + 3pi) 2 . (1) What would be your best estimate of a?…If clients in an industry have homogeneous price-quality choices, a company with higher than average industry unit costs will always have lower profit margins than a competitor with lower than average industry unit costs 1. True B. False C. To answer this question, more information is needed Why ?
- Someone who pays $800 to fly from one city to another instead of paying only $100 for a bus trip between the two cities is making an irrational choice and is thus not maximizing his utility. O True O False 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.A company wants to issue a coupon for a product. The marginal cost of the product is $1. If the elasticity of demand for coupon users is -5 and the elasticity of demand for non-coupon users is -2, then in order to maximize profit, what should the value of the coupon (in dollars) be? Group of answer choices: 1) 0.50 2) 0.75 3) 1.00 4) 1.50Please answer both parts I do not understand, thank you :) Part A. Suppose that the rats on the campus of Hypothetical U are found to be carriers of a plague. Eradicating the rats has an estimated cost of $1,000,000 and is expected to reduce the probability a given student dies of the plague from 1/2,000 to zero. Suppose that there are 30,000 students on campus. Suppose further that the administration refuses to eradicate the rats due to the cost. From this information, we can estimate that the administration’s willingness to pay to save a student statistical life is less than $1,000,000 $33,333.3 $100,000 $66,666.7 Part B: Suppose a company offers a standard insurance contract with a premium (r) of $1,000 and a payout (q) of $8,000. Suppose that Rock earns a healthy state income of $50,000, a sick state income of $20,000, and has a 10% chance of becoming ill. From this information, you can determine that the expected profit for the insurance company is…
- The Company wants to level the production mix at the pacemaker. The average daily demand and their variance for the five products in this product family is as shown in the following Table. Product ID A1 A2 B1 B2 B3 C Daily Demand ~ N(mean,variance) (144, 400) (120,400) (48,100) (48,100) (48,100) (24,25) A day is 432 minutes (after excluding paid breaks and lunch) and a pallet holds 12 units of any part. Items A1 & A2 are ordered daily, items B1, B2 & B3 once every three days and item C occasionally. The company keeps finished good stock for products A&B (with a buffer stock to cover 97.7% of demand surges) and produces C on demand. How would you schedule the average daily orders? How many units of stock are you going to keep in the finished goods supermarket? Consider the following demand for Monday: Product ID A1 A2 B1 B2 B3 C1 Monday Orders 168 108 156 0 0 36 Do you have enough stock and the…Consider a market for used cars in which buyers would pay up to $18,000 for an orange (good used car) and $8,000 for a lemon. The owners of oranges will accept no less than $12,500 while owners of lemons will accept no less than $3,000. Assume that buyers always end up paying their full willingness to pay and that the fraction of oranges in the population is known to be f. If sellers can observe the type of car but buyers can’t, what is the minimum value of f such that the market for oranges does not collapse?Let vij be bidder i's valuation for object j, where i in {1,2,3} and j in {1,2}. Bidder i knows its valuation vi; but other bidders only know that vi; is drawn uniformly from [0, 100]. If bidder i wins object 1 at price p1 and object 2 at price p2, bidder i's payoff is v;1 If bidder i wins only object j at price p;, his payoff is vij – Pj. If bidder i does not win any object, his payoff is 0. The auction proceeds as follows. The initial prices are zero for both objects. All bidders sit in front of their computers and observe the prices for both items in real-time. Initially, all bidders are invited to enter the bidding race for both items. At any moment in time, each bidder has the option to withdraw from the bidding race for either object or both. If a bidder withdraws from the bidding for one object, he can no longer get back to the bidding for that object, but he can stay in the bidding race for the other object if he hasn't withdrawn from it previously. The price for an object…