shown in the following table. Assume George has no fixed costs, and his cost of producing each portrait is $9.Reservationprice ($ perphoto)Customer50246423834307.26822a. Suppose George is permitted to charge two prices. He knows that customers with a reservation price above $30 never bother withcoupons, whereas those with a reservation price of $30 or less always use them. At what level should George set the list price of aportrait? At what level should he set the discount price? How many photo portraits will he sell at each price?List price of a portrait: $34Number of portraits to be sold at the list price:5 portraitsDiscount price of a portrait: $22Number of portraits to be sold at the discounted price:3 portraitsb. In this case, what is George's economic profit and how.much consumer surplus is generated each day?Economic profit: $117Consumer surplus: $|52

Customer Reservation price Total Revenue Marginal Revenue 1 $50 $50 2 $46 $96 $42 3 $42…

List price of a portrait: $ 34 Number of portraits to be sold at the list price: 5 portraits Discount price of a portrait: $ 22 Number of portraits to be sold at the discounted price: 3 portraits b. In this case, what is George's economic profit and how much consumer surplus is generated each day? Economic profit: $ 117 Consumer surplus: $ 52

List price of a portrait: $ 34 Number of portraits to be sold at the list price: 5 portraits Discount price of a portrait: $ 22 Number of portraits to be sold at the discounted price: 3 portraits b. In this case, what is George's economic profit and how much consumer surplus is generated each day? Economic profit: $ 117 Consumer surplus: $ 52

Economics: Private and Public Choice (MindTap Course List)

16th Edition

ISBN:9781305506725

Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Chapter24: Price-searcher Markets With High Entry Barriers

Section: Chapter Questions

Problem 13CQ

See similar textbooks

Similar questions

Forty thousand potential customersof a cable TV franchise are each willing to pay $11/month for HBO and $11/month for Cinemax. Twenty thousand potential customers are willing to pay $20/month for HBO and only $5/month for Cinemax. Assume costs are zero. If the franchise sells the two services in a bundle, it should charge1: $312: $253: $224: $205: $18
Q. STIHL, Inc., manufactures gasoline-powered chain saws for professional, commercial, farm, and consumer markets. To “better serve” their customers, STIHL offers its chain saws in four different quality lines and associated price ranges: occasional use, midrange, professional, and arborist. Under what circumstances could offering multiple qualities of a product be price discrimination? What form of price discrimination might this represent—first-, second-, or third-degree price discrimination? Explain why this practice could increase profit at STIHL.
TotsPoses Inc., a profit-maximizing business, is the only photography business in town that specializes in portraits of small children. George, who owns and runs TotsPoses, expects to encounter an average of eight customers per day, each with a reservation price (shown in the following table). Assume George has no fixed costs, and his cost of producing each portrait is $12. a. How much should George charge if he must charge a single price to all customer? At this price, how many portraits will George produce each day? What will be his economic profit? b. How much consumer surplus is generated each day at this price? c. If George is very experienced and knows the reservation prices of each customer, how many portraits will he produce each day and how much economic profit will he earn? d. Assume George charges only 2 different prices. He know that customers with reservation prices above $30, will never use coupons and the customers with reservation prices below will always use…
Suppose High-Tech Software sells two products-a word-processing package and a spreadsheet package. Suppose that the business community values the word-processing package at $100 per unit and the spreadsheet package at $250 per unit while the university community values the word-processing package at $125 and the spreadsheet at $200. (Assume that the marginal cost of each unit is zero.) a. What are the profit-maximizing price that High-Tech should charge if they sell each product separately and what is the total price of the two goods? b. If High-Tech is able to engage in tying, what is the profit-maximizing price for the two products as a bundle? c. Should this be legal?
You own a private parking lot near City University with a capacity of 600 cars. The demand for parking at this lot is estimated to be Q=1,000 - 2P, where Q is the number of customers with monthly parking passes and P is the monthly parking fee per car. 1)Derive your marginal revenue schedule. 2) What price generates the greatest revenues? Your fixed costs of operating the parking lot, such as the monthly lease paid to the landlord are £25,000 per month. In addition, your insurance company charges you £20 per car per month for liability coverage and the City of London charges you £30 per car per month as part of its policy to discourage the use of private cars in the city center. 3)What is your profit maximizing price?
Q15 Assume that Bandai Namco is a monopolist that can sell 10 units of toy output at $5 per unit and 11 units at $4.80 per unit. For Bandai Namco to profitably produce and sell the eleventh unit of output, its marginal cost must be anywhere at or below Multiple Choice $36. $3.20. $5. $2.80. $4.80.
Consider a mature maket with a demand given by P=105.4-10Q The cost of production is given by C=10Q For many years this market has been served by a monopolist. How much profit would the firm lose if it is forced to behave as a competitive firm In all your calculations use numbers with 4 decimal places.
Please answer fast A profit-maximizing shop in a town has a constant marginal cost of $10 and can sell to two types of customers: students and non-students. The shop faces a demand by students given by QS = 50‒P and a demand by non-students given by QN = 190‒3P. Which price would students pay under uniform pricing? Which price would students pay if the seller could successfully engage in price discrimination?
There are two ice-cream parols on a beach. The dayly demand for ice-creams is given by Q = 3252 - 7p. The average variable cost of an ice-cream is 83 while the rent of the place is 576. How many ice-creams is one company selling if the two ice-cream stands operate as Cournot duopolists? (Please use 2 decimals in your answer.)
In today world price discrimination is commonly used by various companies to enhance their profit. What are some of the advantages and disadvantages of the price discrimination.
Pfizer own the copyright for “Pfizer COVID Vaccine (PCV)”. The total cost of producing Q units of PCV is TC=100+50Q+0.5Q2: . The annual demand for PCV is P=300-0.2Q. Q is the number of units of PCV. The annual interest rate facing all agents in the economy is 8.75%. a. How many units of PCV should Pfizer produce? What price should Pfizer charge for one unit of PCV? Clearly explain your reasoning. b. What is TR from PCV to Pfizer? What are Pfizer’s annual profits from PCV? c. Suppose the Pfizer copyright of PCV was due to expire by 2021. Describe the new market structure that would occur if PCV entered the public domain, meaning anybody could use PCV. What would be the new price of one unit of PCV? How many units of PCV would be sold by the COVID vaccine industry?
Scenario 15-7 Black Box Cable TV is able to purchase an exclusive right to sell a premium movie channel (PMC) in its market area. Let's assume that Black Box Cable pays $150,000 a year for the exclusive marketing rights to PMC. Since Black Box has already installed cable to all of the homes in its market area, the marginal cost of delivering PMC to subscribers is zero. The manager of Black Box needs to know what price to charge for the PMC service to maximize her profit. Before setting price, she hires an economist to estimate demand for the PMC service. The economist discovers that there are two types of subscribers who value premium movie channels. First are the 4,000 die-hard TV viewers who will pay as much as $150 a year for the new PMC premium channel. Second, the PMC channel will appeal to 20,000 occasional TV viewers who will pay as much as $20 a year for a subscription to PMC. Refer to Scenario 15-7. What is the deadweight loss associated with the nondiscriminating pricing…