The reservation prices (in dollars) of three classes of demanders (classes A, B, and C) for Ricky Parton's (a Latin country-western singer) compact disks are given in the table that follows: Class CD 1 CD 2 А 11 5 В С 10 It costs $4 to produce and distribute each compact disk. The company can sell each CD separately, can put them together as a boxed set (that is, as a pure bundle), or can sell them in a mixed bundling format (offer the CDs both separately and as a boxed set). Assume that each demander wants only one of each of the CDs at the reservation price (or at any lower price) and that there are an equal number of demanders in each class. For simplicity, assume that the only costs are those mentioned here a. What pricing method would you advise Ricky's company to use? b. How much better (profit-wise) is the best pricing method than the second most profitable pricing method?
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- A manufacturer of microwaves has discovered that male shoppers have little value for microwaves and attribute almost no extra value to an auto-defrost feature. Female shoppers generally value microwaves more than men and attribute greater value to the auto-defrost feature. There is little additional cost to incorporating an autodefrost feature. Since men and women cannot be charged different prices for the same product, the manufacturer is considering introducing two different models. The manufacturer has determined that men value a simple microwave at $70 and one with auto-defrost at $80 while women value a simple microwave at $80 and one with autodefrost at $150. If there is an equal number of men and women, what pricing strategy will yield the greatest revenue? What if women comprise the bulk of microwave shoppers?Consider a demand and supply scenario for 3-D glasses. An independent contracting firm was so kind and estimated the supply curve as a function of the quantity x as s(x)=.06x2 + 1.8 x + 60 and the demand as d(x)= -.075 x2 – 1.5x +180. a) Solve for the equilibrium quantity and price. What condition has to hold in an equilibrium? For full credit you must show ALL steps of your algebra. b) Graph the supply and demand curve. Clearly mark the proper price and quantity intercept. Show how you calculated the intercepts.Take this hypothetical situation: Suppose that the supply side of the market for for electric energy is comprised of two sellers: Seller 1 and Seller 2. Let P be the price of one unit of electric energy, and Q be the quantity of electric energy. Seller 1 owns a hydropower factory with a constant marginal cost of $3 and can produce a maximum of 10 units of electric energy. In addition, the hydropower plant has a requirement of a minimum of 3 units of electric energy. Seller 2 owns a solar factory to produce electric energy. This factory has a constant marginal cost of $5 and can produce a maximum of 5 units of electric energy. With this given information, please sketch the market supply by aggregating the two individual supplies. Please label the graph clearly for slopes, kinks, intercepts, etc.
- Take this hypothetical situation: Suppose that the supply side of the market for for electric energy is comprised of two sellers: Seller 1 and Seller 2. Let P be the price of one unit of electric energy, and Q be the quantity of electric energy. Seller 1 owns a hydropower factory with a constant marginal cost of $3 and can produce a maximum of 10 units of electric energy. In addition, the hydropower plant has a requirement of a minimum of 3 units of electric energy. Seller 2 owns a solar factory to produce electric energy. This factory has a constant marginal cost of $5 and can produce a maximum of 5 units of electric energy. A) With this given information, please sketch the market supply by aggregating the two individual supplies. Please label the graph clearly for slopes, kinks, intercepts, etc. B) Suppose that the price of geothermal increases. On the graph drawn in part A, show precisely how the supply curve changes. C) Suppose that the price of geothermal increases. In a market…The information in the table below shows the total demand for premium-channel digital cable TV subscriptions in a small urban market. Assume that each digital cable TV operator pays a fixed cost of $200,000 (per year) to provide premium digital channels in the market area and that the marginal cost of providing the premium channel service to a household is zero. 1. Assume there are two profit-maximizing digital cable TV companies operating in this market. Further assume that they are not able to collude on the price and quantity of premium digital channel subscriptions to sell, how many premium digital channel cable TV subscriptions will be sold altogether and what price will be charged when this market reaches a Nash equilibrium? 2. Under the conditions given in Question #3 of this problem, how much profit will each firm earn when this market reaches a Nash equilibrium? 3. What is the socially efficient level of digital premium channel subscriptions for this market and at what…Given for question #1 Cost function C= 3000+6Q Q = 4400 - 200Q - This is the demand function Q= 1600 P = 14 Profit= 22400-12600 = 9800 Please Provide the Answer for question #2 A and B 2. Demand across the two locations After taking your managerial economics class, you realize that you can probably raise your profits by price discriminating by charging different prices in the two locations. You then breakdown sales across the two locations. In Laredo: You sold 960 burger meals per week at $10 and 600 meals at $13. In San Antonio: You sold 1440 meals per week at $10 and 1200 meals at $13 A. Using the two prices above, estimate your demand function in Laredo. What would demand be at the optimal price from Q1 B. Using the two prices above, estimate your demand function in San Antonio. What would demand be at the optimal price from Q1?
- Question You are an executive for Super Computer, Inc. (SC), which rents out super computers. SC receives a fixed rental payment per time period in exchange for the right to unlimited computing at a rate of P cents per second. SC has two types of potential customers of equal number—10 businesses and 10 academic institutions. Each business customer has the demand function: Q=14−P, where Q is in millions of seconds per month; each academic institution has the demand: Q=10−P. The marginal cost to SC of additional computing is 2 cents per second, regardless of volume. a. Suppose that you could separate business and academic customers. What rental fee and usage fee would you charge each group? What would be your profits? (Round all answers to the nearest integer) For business users, the rental fee would be$720,000per month and the usage fee is 2 cents per second. For academic institutions, the rental fee would be $320,000 per month and the usage fee is 2 cents per…A chemical company produces three products, A, B, and C, and can sell these products in unlimited quantities at the following unit prices: A, $10; B, $55; and C, $100. Producing a unit of A requires one hour of labor; a unit of B, two hours of labor plus two units of A; and a unit of C, three hours of labor plus one unit of B. Any A that is used to produce B cannot be sold. Similarly, any B that is used to produce C cannot be sold. A total of 4000 hours of labor is available. Only as many as 500 units of product C can be sold. Determine how to maximize the company’s revenue.JetBlue and Delta are the only two major airlines with regularly scheduled service between New York and Nantucket. There are 900 potential passengers every week, each of whom is willing to pay up to $400 for a ticket. Since the two airlines provide an essentially identical (bad) service, customers simply prefer to buy from the cheaper one. (If they charge the same price, then they will split the market equally.) Each airline can transport at most 1200 passengers each week. You can safely assume that each airline spends literal peanuts (i.e., zero) serving passengers; however, each passenger displaces air cargo that is worth $160 in profits to the carriers. Suppose that each airline takes a short-run perspective and only wants to maximize each week's profits, and that neither one would consider shutting down the route in the foreseeable future. (a) What is the appropriate economic model to study price competition in this market? (b) If you use Nash equilibrium to make a prediction, what…
- JetBlue and Delta are the only two major airlines with regularly scheduled service between New York and Nantucket. There are 900 potential passengers every week, each of whom is willing to pay up to $400 for a ticket. Since the two airlines provide an essentially identical (bad) service, customers simply prefer to buy from the cheaper one. (If they charge the same price, then they will split the market equally.) Each airline can transport at most 1200 passengers each week. You can safely assume that each airline spends literal peanuts (i.e., zero) serving passengers; however, each passenger displaces air cargo that is worth $160 in profits to the carriers. Suppose that each airline takes a short-run perspective and only wants to maximize each week's profits, and that neither one would consider shutting down the route in the foreseeable future. (a) What is the appropriate economic model to study price competition in this market? (b) If you use Nash equilibrium to make a prediction, what…JetBlue and Delta are the only two major airlines with regularly scheduled service between New York and Nantucket. There are 900 potential passengers every week, each of whom is willing to pay up to $400 for a ticket. Since the two airlines provide an essentially identical (bad) service, customers simply prefer to buy from the cheaper one. (If they charge the same price, then they will split the market equally.) Each airline can transport at most 1200 passengers each week. You can safely assume that each airline spends literal peanuts (i.e., zero) serving passengers; however, each passenger displaces air cargo that is worth $160 in profits to the carriers. Suppose that each airline takes a short-run perspective and only wants to maximize each week’s profits, and that neither one would consider shutting down the route in the foreseeable future. a) What is the appropriate economic model to study price competition in this market, and why? b) If you use Nash equilibrium to make a…Case study 1Oil pump price war Based on an article from The Telegraph, 10 July 2009 “Asda, the supermarket chain, sparked a potential petrol price war yesterday as it cut its fuel prices to 99.9p per litre, declaring there was “little justification” to charge more than £1 at the pumps.The reduction was made on petrol and diesel, representing an average cut of 2p and 1p respectively, at all the company’s 176 forecourts.The move was quickly followed by a pledge from Morrisons that it too would sell petrol for under £1 a litre, signalling the start of a price war. BP said it would cut prices by around 2p at many of its sites, and would continue to respond to local competition.A spokesman for the AA said: “Asda’s price drop marks the start of a new price war. Others will have no choice but to follow.”Asda’s Commercial director David Miles said: “There is no justification for any major retailer selling fuel above £1 per litre – that is why we are delighted to be able to reduce both petrol…