Ms. Wong is a fitness trainer providing personal fitness training courses to her customers. She can be taken as a monopoly in providing her unique way of training. The following table shows her customers’ maximum price willing to pay for each of her weekly one-hour training course in two centers at Tsim Sha Tsui (TST) and Tai Po (TP) respectively. The rental cost of both centers is constant at $250 per week in total for Ms. Wong no matter how many classes she teaches a week, while for each hour of course given, she needs to give up her work as a lifeguard that earns $270 per hour. Assume no other costs for simplicity. Customer Center A TST B TST C TST D TST ETP F TST GTP H TST ITP J TST KTP LTP MTP NTP Maximum Price Willing to Pay($) 400 390 380 370 360 350 340 330 320 310 300 290 280 270 (a) Suppose Ms. Wong charges one single price to all of her customers. What is the profit-maximizing price she should charge? What is the amount of her economic profit? Show your calculation. (b) Ms. Wong observes that customers who go to different centers have different maximum price they are willing to pay on average. Therefore, she plans to charge one single price to customers in TST center and another single price to customers in TP center. What is the profit-maximizing price for the TST customers and TP customers respectively? Will she serve more customers in total in this case? Can she earn more profit in total than charging a single price? Show your calculations. (c) Do you think if the pricing strategy in part (b) is likely to be successful? Why?
Ms. Wong is a fitness trainer providing personal fitness training courses to her customers. She can be taken as a
Customer Center A TST B TST C TST D TST ETP F TST GTP H TST
ITP J TST KTP LTP
MTP NTP
Maximum Price Willing to Pay($) 400
390
380
370
360
350
340
330
320
310
300
290
280
270
(a) Suppose Ms. Wong charges one single price to all of her customers. What is the profit-maximizing price she should charge? What is the amount of her economic profit? Show your calculation.
(b) Ms. Wong observes that customers who go to different centers have different maximum price they are willing to pay on average. Therefore, she plans to charge one single price to customers in TST center and another single price to customers in TP center. What is the profit-maximizing price for the TST customers and TP customers respectively? Will she serve more customers in total in this case? Can she earn more profit in total than charging a single price? Show your calculations.
(c) Do you think if the pricing strategy in part (b) is likely to be successful? Why?
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