iv. What will be the profit for AG Travel and Tour in the case of (iii) above? v. If AG Travel and Tour wants to charge a package price, what is the highest price it can charge? vi. What profit will AG Travel and Tour make if it charges the package price found in (v) above?
iv. What will be the profit for AG Travel and Tour in the case of (iii) above? v. If AG Travel and Tour wants to charge a package price, what is the highest price it can charge? vi. What profit will AG Travel and Tour make if it charges the package price found in (v) above?
Chapter13: Monopoly And Antitrust
Section: Chapter Questions
Problem 13P
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Question
Kindly solve iv, v and vi
Expert Solution
Step 1
Since AG Tours and Travels is not able to identify members of each group, n order to capture all the demand, it will charge the lowest of the maximum willingness to pay for each product of the 2 groups. For room and board, it will charge 1800 and for entertainment, it will charge 500.
(iv). In the above case profit of AG Tour and Travels from each group will be 1300
= 1800 + 500 - 1000
= 1300
Total profit = 1300 + 1300
Total profit = 2600
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