The Camera Shop sells two popular models of digital SLR cameras (Camera A Price: 200, Camera B Price: 300). The sales of these products are not independent of each other, but rather if the price of one increase, the sales of the other will increase. In economics, these two camera models are called substitutable products. The store wishes to establish a pricing policy to maximize revenue from these products. A study of price and sales data shows the following relationships between the quantity sold (N) and prices (P) of each model: NA 195 0.6PA + 0.25PB NB = 301 + 0.08PA - 0.5PB Construct a model for the total revenue and implement it on a spreadsheet. Develop a two-way data table to estimate the optimal prices for each product in order to maximize the total revenue. Vary each price from $250 to $500 in increments of $10. Max profit occurs at Camera A price of $ Max profit occurs at Camera B price of $

The Camera Shop sells two popular models of digital SLR cameras (Camera A Price: 200, Camera B Price: 300). The sales of these products are not independent of each other, but rather if the price of one increase, the sales of the other will increase. In economics, these two camera models are called substitutable products. The store wishes to establish a pricing policy to maximize revenue from these products. A study of price and sales data shows the following relationships between the quantity sold (N) and prices (P) of each model: NA 195 0.6PA + 0.25PB NB = 301 + 0.08PA - 0.5PB Construct a model for the total revenue and implement it on a spreadsheet. Develop a two-way data table to estimate the optimal prices for each product in order to maximize the total revenue. Vary each price from $250 to $500 in increments of $10. Max profit occurs at Camera A price of $ Max profit occurs at Camera B price of $

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter14: Monopoly

Section: Chapter Questions

Problem 14.12P

See similar textbooks

Similar questions

A golf cub’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?
The manager of a convenience store competes in a monopolistically competitive market and buys cola from a supplier at a price of $1.25 per liter. The manager thinks that because there are several supermarkets nearby, the demand for cola sold at her store is slightly more elastic than the elasticity for the representative food store reported in Table (which is −3.8). Based on this information, she perceives that the elasticity of demand for cola sold by her store is −4. What price should the manager charge for a liter of cola to maximize profits?
Explain the type of pricing strategy that you as the manager of a company would implementfor Good X and Good Y with the following price elasticity of demand co efficients. Usediagrams to motivate your answer.a). Good X: 2.3 b). Good Y: 0.6
Suppose the European Union (EU) is investigating a proposed merger between two of the largest distillers of premium Scotch liquor. Based on some economists’ definition of the relevant market, the two firms proposing to merge enjoyed a combined market share of about two-thirds, while another firm essentially controlled the remaining share of the market. Additionally, suppose that the (wholesale) market elasticity of demand for Scotch liquor is –1.3 and that it costs $16.20 to produce and distribute each liter of Scotch. Based only on these data, provide quantitative estimates of the likely pre- and postmerger prices in the wholesale market for premium Scotch liquor. In light of your estimates, are you surprised that the EU might raise concerns about potential anticompetitive effects of the proposed merger? Explain carefully.
Suppose the European Union (EU) was investigated and proposed a merger between two of the largest distillers of premium Scotch liquor. Based on some economists’ definition of the relevant market, the two firms proposing to merge enjoyed a combined market share of about two-thirds, while another firm essentially controlled the remaining share of the market. Additionally, suppose that the (wholesale) market elasticity of demand for Scotch liquor is −2 and that it costs $16.50 to produce and distribute each liter of Scotch. Based only on these data, provide quantitative estimates of the likely pre- and postmerger prices in the wholesale market for premium Scotch liquor. Instructions: Do not round intermediate calculations. Enter your final responses rounded to the nearest penny (two decimal places). Pre-merger price: $ Post-merger price: $
Suppose the European Union (EU) was investigated and proposed a merger between two of the largest distillers of premium Scotch liquor. Based on some economists’ definition of the relevant market, the two firms proposing to merge enjoyed a combined market share of about two-thirds, while another firm essentially controlled the remaining share of the market. Additionally, suppose that the (wholesale) market elasticity of demand for Scotch liquor is −1.3 and that it costs $14.20 to produce and distribute each liter of Scotch.Based only on these data, provide quantitative estimates of the likely pre- and postmerger prices in the wholesale market for premium Scotch liquor.Instructions: Do not round intermediate calculations. Enter your final responses rounded to the nearest penny (two decimal places).Pre-merger price: $ Post-merger price: $
Nile.com, the online bookseller, wants to increase its total revenue. One strategy is to offer a 10% discount on every book it sells. Nile.com knows that its customers can be divided into two distinct groups according to their likely responses to the discount. The accompanying table shows how the two groups respond to the discount. Group A Group B(sales per week) (sales per week) Volume of sales beforethe 10% discount 1.55 million 1.50 million Volume of sales afterthe 10% discount 1.65 million 1.70 million A. Using the midpoint method, calculate the price elasticities of demand for group A and group B. B. Explain how the discount will affect total revenue from each group.C. Suppose Nile.com knows which group each customer belongs to when he or she logs on and can choose whether or not to offer the 10% discount. If Nile.com wants to increase its total revenue, should discounts be offered to group A or to group B, to neither group, or to both groups?
Nile.com, the online bookseller, wants to increase its total revenue. One strategy is to offer a 10% discount on every book it sells. Nile.com knows that its customers can be divided into two distinct groups according to their likely responses to the discount. The accompanying table shows how the two groups respond to the discount. Group A Group B(sales per week) (sales per week) Volume of sales beforethe 10% discount 1.55 million 1.50 million Volume of sales afterthe 10% discount 1.65 million 1.70 million A. Using the midpoint method, calculate the price elasticities of demand for group A and group B. B. Explain how the discount will affect total revenue from each group. C. Suppose Nile.com knows which group each customer belongs to when he or she logs on and can choose whether or not to offer the 10% discount. If Nile.com wants to increase its total revenue, should discounts be offered to group A or to group B, to neither group, or to both groups?
Several Governments in CARICOM nations are reluctant to allow the provision of telecommunication services by multiple providers. They prefer that a Government Agency provides these services as they believe that consumers will be protected. However the revenue they gain should not be ignored as a possible motive. A recent study found that 8 countries out of the 15 in the CARICOM nations’ have telecommunication services being provided by the a state company. For example, in St. Lucia, De Phone is the sole provider of telecoms. They offer discounts to senior citizens and students and also provide a lower price for individual who purchase multiple plans. Of note, the remaining CARICOM nations, including Trinidad and Tobago, have opened their markets to competition. These countries have seen increased advertising among competitors to market their product. i. State what market structure exists in St. Lucia and illustrate how equilibrium price and quantity determined in this industry.Draw…
Several Governments in CARICOM nations are reluctant to allow the provision of telecommunication services by multiple providers. They prefer that a Government Agency provides these services as they believe that consumers will be protected. However the revenue they gain should not be ignored as a possible motive. A recent study found that 8 countries out of the 15 in the CARICOM nations’ have telecommunication services being provided by the a state company. For example, in St. Lucia, De Phone is the sole provider of telecoms. They offer discounts to senior citizens and students and also provide a lower price for individual who purchase multiple plans. Of note, the remaining CARICOM nations, including Trinidad and Tobago, have opened their markets to competition. These countries have seen increased advertising among competitors to market their product. State what market structure exists in Trinidad and Tobago. Explain if excess profit will exist in the long run.
Several Governments in CARICOM nations are reluctant to allow the provision of telecommunication services by multiple providers. They prefer that a Government Agency provides these services as they believe that consumers will be protected. However the revenue they gain should not be ignored as a possible motive. A recent study found that 8 countries out of the 15 in the CARICOM nations’ have telecommunication services being provided by the a state company. For example, in St. Lucia, De Phone is the sole provider of telecoms. They offer discounts to senior citizens and students and also provide a lower price for individual who purchase multiple plans. Of note, the remaining CARICOM nations, including Trinidad and Tobago, have opened their markets to competition. These countries have seen increased advertising among competitors to market their product. State what market structure exists in St. Lucia and illustrate how equilibrium price and quantity determined in this industry with graphs
UCOM is able to purchase an exclusive right to sell a soccer channel (SC) in its market area. Let's assume that UCOM pays $150,000 a year for the exclusive marketing rights to SC. Since UCOM has already installed cable to all of the homes in its market area, the marginal cost of delivering Soccer Channel to subscribers is zero. The manager of UCOM needs to know what price to charge for the Soccer Channel service to maximize her profit. Before setting price, she hires an economist to estimate demand for the Soccer channel service. The economist discovers that there are two types of subscribers who value soccer. First are the 4,000 die-hard soccer fans who will pay as much as $150 a year for the new soccer channel. Second, the soccer channel will appeal to about 20,000 occasional TV viewers who will pay as much as $20 a year for a subscription to soccer channel. What is the deadweight loss associated with the non-discriminating pricing policy compared to the price discriminating…