Problem 2 A firm produces two products, the demands for which are independent. Each of the products has zero marginal cost. The firm faces four consumers with the following reservation prices: Alyona Betty Celine Delilah Good 1 30 40 80 70 Good 2 140 100 60 60 Bundle 170 140 140 130
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- A nightclub manager realizes that demand for drinks is more elastic among students, and is trying to determine the optimal pricing schedule. Specifically, he estimates the following demands: • 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 nightclub $4 each. (a) Calculate the market demand.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…Management of McPablo’s Food Shops has completed a study of weekly demand for its “old-fashioned” tacos in 53 regional markets. The study revealed that Q = 400 -1,200P + .8A + 55Pop + 800P° where Q is the number of tacos sold per store per week, A is the level of local advertising expenditure (in pesos), Pop denotes the local population (in thousands), and P0 is the average taco price of local competitors. For the typical McPablo’s outlet: P = Php1.50, A = Php1,000, Pop = 40, and P0 = Php1.00. Estimate the weekly sales for the typical McPablo’s outlet. What is the current price elasticity for tacos? What is the advertising elasticity? Should McPablo’s raise its taco prices? Why or why not?
- The Johnson Robot Company’s marketing managers estimate that the demand curve for the company’s robots in 2008 is P = 3,000 - 40Q where P is the price of a robot and Q is the number sold per month. If the firm wants to maximize its dollar sales volume, what price should it charge? a. $3000 b. $1000 c. $1500 d. $750A botanical garden estimates a demand for visits per month as Q = 16 - 2P, where P is the entry fee per visit and Q is monthly visits in 1,000s. There is constant marginal cost of admitting another person to the botanical garden as MC = 2. Mangers currently charge price of P = 5 to enter, resulting in Q = 6 visits (i.e., 6,000 visits per month). The managers are considering a new pricing strategy where they require visitors to pay a flat fee to join a membership to the gardens but then lower the price per visit. a. What price should be charged per visit to the botanical gardens? b. How visits are there at this price? c. What is the maximum amount that visitors would be willing to pay for memberships? Explain.You operate a Caribbean destination resort. You currently offer plans for a cruise departing from the resort and plans for a casino stay. It is expected that in 2021 there will be some return to more normal travel. You will re-launch your advertising for 2021 announcing that customers will be able to do both for one price. Your marginal cost per customer across both tours is $4800. Customer Preferences Cruise Casino Customer 1 $7,000 $3,000 Customer 2 $2,000 $6,000 Given the preferences, would bundling improve profits over the high-price strategy? Support your conclusion by showing if (by how much) profits differ under each strategy, bundle v high price.
- You operate a Caribbean destination resort. You currently offer plans for a cruise departing from the resort and plans for a casino stay. It is expected that in 2021 there will be some return to more normal travel. You will re-launch your advertising for 2021 announcing that customers will be able to do both for one price. Your marginal cost per customer across both tours is $4800. Customer Preferences Cruise Casino Customer 1 $7,000 $3,000 Customer 2 $2,000 $6,000 Given the preferences, would bundling improve profits over the high-price strategy? Support your conclusion by showing if (by how much) profits differ under each strategy, bundle versus high price.Aidan and Celina are the only sellers of jack russell terrier (JRT) inAntigua. Celina chooses her profit maximizing number of JRTs to sell, q1, based on the number of JRT's that she expects Aidan to sell. Aidan knows how Celina will react and chooses the number of JRTs that she herself will sell, q2, aftertaking this information into account. The inverse demand function for JRTs isP(q1+ q2) = 2,000 - 2(q1 + q2). It costs $400 to raise a JRT to sell. (a)Explain in detail what type of competitors are Aidan and Celina. (b) If Celina expects Aidan to sell q2 JRTs, what will her own marginal revenue be if she herself sells q1 JRTs? (c) What is Celina's reaction function, R(q2)?(d) Now if Aidan sells q2 JRTs, what is the total number of JRT's that will be sold. (e) What will be the market price as a function of q2 only? (f) What is Aidan's marginal revenue as a function of q2 only? (g) How many JRTs will Aidan sell? (h) How many JRTs will Celina sell? (i)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 The burrito truck industry in the city is perfectly competitive. On any given evening, the market demand for burritos is given by Qp = 88 - P: where QD is the quantity of burritos demanded per evening, and p is the price of a burrito. Each burrito seller must pay $50 per day to rent a burrito truck. In addition, the cost of ingredients for each burrito is $3, regardless of how many burritos are sold. Given space constraints, each burrito truck is able to serve a maximum of 10 customers per evening. In a long-run equilibrium in the burrito industry, the number of sellers (burrito trucks) in the market every evening will be _____
- A golf club’s owner has commissioned a market study that estimates the average customer’s monthly demand curve for playing 18-hole golf game to be Q=50 – 0.5P, where Q stands for the number of 18-hole golf game, and P is the green fee. The marginal cost is given by MC=20. (1) Under two-part pricing strategy, what is the optimal amount of green fee to charge for one round of 18-hole golf game? (2) Under two-part pricing strategy, what is the optimal amount of membership due? (3) Under two-part pricing strategy, what is the size of the profit obtained from the average customer?Recently, the major firms in the United States cigarette industry joined with the government in a settlement of liability claims. Under the tentative agreement, the industry would curb advertising and pay the equivalent of about $15 billion per year (for smoking-related state Medicaid expenses) in exchange for protection against smoker lawsuits.a) Before the settlement, a leading cigarette manufacturer estimated its marginal cost at $1.00 per pack and its elasticity of demand at -2. What is its optimal price? The firm’s share of the industry payment (based on its historic market share) will raise its average total cost per pack by $.60. What effect will this have on its optimal price?b) A marketing manager suggests that the firm should offer price discounts to the company’s long-term, older, most-loyal (addicted?) customers. Do you agree? Explain carefully.c) In the past, anti-smoking information campaigns have had some limited success in reducing smoking. What price reaction (if any)…Using the following graph that presents the demand, marginalrevenue, and relevant costs for your product, determine your firm’s optimal price,output, and the resulting profits for each of the following scenarios: a.You charge the same unit price to all consumers.b. You engage in perfect price discrimination.c. You engage in two-part pricingJust for each scenario calculate from the graph i) optimal prizeii) optimal quantityiii) Profit