The municipal corporations in most parishes in Jamaica have initiated a program to charge residents for garbage disposal based on the number of cans filled per week. The parish of Kingston decided to increase its per-can price from $500 to $750 per week. In the first week, it was found that the number of cans that were brought to the curb fell from 500 to 450 (although the workers complained that the cans were heavier). The chief economist ran the numbers, informed the mayor that the demand for disposal was inelastic, and recommended that the price be raised to maximize town revenue from the program. Four months later, at a price of $1000 per can, the number of cans has fallen to 125 and town revenues are down. What might have happened?

The municipal corporations in most parishes in Jamaica have initiated a program to charge residents for garbage disposal based on the number of cans filled per week. The parish of Kingston decided to increase its per-can price from $500 to $750 per week. In the first week, it was found that the number of cans that were brought to the curb fell from 500 to 450 (although the workers complained that the cans were heavier). The chief economist ran the numbers, informed the mayor that the demand for disposal was inelastic, and recommended that the price be raised to maximize town revenue from the program. Four months later, at a price of $1000 per can, the number of cans has fallen to 125 and town revenues are down. What might have happened?

Microeconomics: Private and Public Choice (MindTap Course List)

16th Edition

ISBN:9781305506893

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

Chapter9: Price Takers And The Competitive Process

Section: Chapter Questions

Problem 11CQ

See similar textbooks

Similar questions

When trying to assess differences in her customers, Claire—the owner of Claire’s Rose Boutique—noticed a difference between the typical demand of her female versus her male customers. In particular, she found her female customers to be more price sensitive in general. After conducting some sales analysis, she determined that her female customers have the following demand curve for roses: QF = 24 − 2P. Here, QF is the quantity of roses demanded by a female customer and P is the price charged per rose. She determined that her male customers have the following demand curve for roses: QM = 27 − P. Here, QM is the quantity of roses demanded by a male customer. If two unaffiliated customers walk into her boutique, one male and one female, determine the demand curve for these two customers combined (i.e., what is their aggregate demand?).
Harriet McNeil, proprietor of McNeil's Auto Mall, believes that it is good business for her automobile dealership to have more customers on the lot than can be served, as she believes this creates an impression that demand for the automobiles on her lot is high. However, she also understands that if there are far more customers on the lot than can be served by her salespeople, her dealership may lose sales to customers who become frustrated and leave without making a purchase. Ms. McNeil is primarily concerned about the staffing of salespeople on her lot on Saturday mornings (8:00 a.m. to noon), which are the busiest time of the week for McNeil's Auto Mall. On Saturday mornings, an average of 6.8 customers arrive per hour. The customers arrive randomly at a constant rate throughout the morning, and a salesperson spends an average of one hour with a customer. Ms. McNeil's experience has led her to conclude that if there are two more customers on her lot than can be served at any time…
A discount shoe store always runs a ’buy one, get one free (limit one free pair per customer)’ campaign. A customer asked a clerk, if he would sell her one pair for half price. The clerk answered, ”I’m sorry, I can’t do that.” but when the customer decided to leave the store, the clerk hastily offered, “However, I think I can give you a 40% discount on any pair in the store.” Assuming the consumer has $200 to spend on shoes (X) or all other goods (Y ), and that shoes cost $100 per pair: a. Illustrate the consumer’s opportunity set with the ”buy one, get one free” deal and with a 50 percent discount. b. Why was the 40 percent discount offered only after the consumer rejected the ”buy one, get one free” deal and started to leave the store? c. Why was the clerk willing to offer a ”buy one, get one free” deal, but unwilling to sell a pair of shoes for half price?
D2 A. Drive-in cinema became very popular in the late 1950s and early 1960s, particularly after screening Rebel Without a Cause in 1955 with James Dean and Natalie Wood, the main young stars of the film as a couple. So, finding a good pricing for this new type of movie screening was an issue for the theatre owners. If the demand for this entertainment was more price-sensitive for couples than for single individuals, managers would be optimally better off if they could charge one admission fee for the driver of the car and an extra fee for passengers. True or false? Explain. B. Hewlett-Packard had a program in which a consumer could mail in a form together with the proof of purchase of an inkjet printer and receive a rebate of $10.00. why not just lower the price of the printer by $10.00?
From California to New York, legislative bodies across the United States are considering eliminating or reducing the surcharges that banks impose on noncustomers, who make $10 million in withdrawals from other banks’ ATM machines. On average, noncustomers earn a wage of $22 per hour and pay ATM fees of $3.50 per transaction. It is estimated that banks would be willing to maintain services for 4 million transactions at $1.00 per transaction, while noncustomers would attempt to conduct 20 million transactions at that price. Estimates suggest that, for every 1 million gap between the desired and available transactions, a typical consumer will have to spend an extra minute traveling to another machine to withdraw cash. Based on this information, use a graph to carefully illustrate the impact of legislation that would place a $1.00 cap on the fees banks can charge for noncustomer transactions.
An economist was trying to understand the relation between price, Marginal Revenueand Marginal cost in Monopoly and Perfect Competition. Determine equilibrium priceand output in the long run under Monopoly and Perfect Competition if the marketdemand curve is given as QD=500-2P and Marginal cost is Rs 50. Also comment onthe values obtained in the case of Monopoly and Perfect Competition
From California to New York, legislative bodies across the United States are considering eliminating or reducing the surcharges that banks impose on noncustomers, who make $14 million in withdrawals from other banks’ ATM machines. On average, noncustomers earn a wage of $20 per hour and pay ATM fees of $2.75 per transaction. It is estimated that banks would be willing to maintain services for 5 million transactions at $1.00 per transaction, while noncustomers would attempt to conduct 19 million transactions at that price. Estimates suggest that, for every 1 million gap between the desired and available transactions, a typical consumer will have to spend an extra minute traveling to another machine to withdraw cash.a. Based on this information, what would be the nonpecuniary cost of legislation that would place a $1.00 cap on the fees banks can charge for noncustomer transactions?b. What would be the full economic price of this legislation?
From California to New York, legislative bodies across the United States are considering eliminating or reducing the surcharges that banks impose on noncustomers, who make $10 million in withdrawals from other banks’ ATM machines. On average, noncustomers earn a wage of $22 per hour and pay ATM fees of $3.00 per transaction. It is estimated that banks would be willing to maintain services for 6 million transactions at $1.25 per transaction, while noncustomers would attempt to conduct 21 million transactions at that price. Estimates suggest that, for every 1 million gap between the desired and available transactions, a typical consumer will have to spend an extra minute traveling to another machine to withdraw cash.Based on this information, what would be the nonpecuniary cost of legislation that would place a $1.25 cap on the fees banks can charge for noncustomer transactions?Instructions: Enter your responses rounded to the nearest penny (two decimal places).$ What would be the full…
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
You are the manager of Zokia Ghana Limited, a producer of beans. In Ghana, it is possible to produce beans or groundnut using the same resources. Therefore, producers are able to sw itch from beans to groundnut production depending on market conditions. Consequently, Zokia consulted an Economist who estimated the demand function for beans as: Qbd = 600 – 4Pb – 0.03M – 12Pg + 15T + 6Pe + 1.5N where Qbd is the quantity demanded of beans each month, ?? is the average price of beans (in Ghana Cedis), M is the average household income (in GH¢), ?? is the price of groundnut (in GH¢), T is a consumer taste index ranging in value from 0 to 10 (the highest rating), ?? is the price (in GH¢) consumers expect to pay next month for beans, and N is the number of buyers in the market for beans. Assume the following initial values: ??=5, ??= 40, T= 6.5, Pe= 5.25, N= 2000, Qbd = 2479 Using the concept of own price elasticity, advise management on price change in order to increase revenue.