MANAGERIAL/ECON+BUS/STR CONNECT ACCESS
9th Edition
ISBN: 2810022149537
Author: Baye
Publisher: MCG
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Chapter 10, Problem 19PAA
To determine
The relevant cost for decision making and whether GearNet should produce 250 hubs or 500 hubs.
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Hubert owns a plot of land in the desert that isn't worth much. One day, a giant meteorite falls on his property, making a large crater. The event attracts scientists and tourists, and Hubert decides to sell nontransferable admission tickets to the meteor crater to both types of visitors: scientists (Market A) and tourists (Market B). The following graphs show daily demand (D) curves and marginal revenue (MR) curves for the two markets. Hubert’s marginal cost of providing admission tickets is zero
Suppose that at first, Hubert charges the same price of $8 per admission in both markets so that the total number of admissions demanded is_______tickets.
Suppose now that Hubert decides to charge a different price in each market. To maximize revenue, Hubert should charge_________per admission in Market A and________per admission in Market B. At these prices, he will sell a total quantity of __________admission tickets per day.
Complete the following table by calculating…
Eric owns a plot of land in the desert that isn't worth much. One day, a giant meteorite falls on his property,
making a large crater. The event attracts scientists and tourists, and Eric decides to sell nontransferable admission
tickets to the meteor crater to both types of visitors: scientists (Market A) and tourists (Market B). The following
graphs show daily demand (DD) curves and marginal revenue (MRMR) curves for the two markets. Eric's marginal
cost of providing admission tickets is zero.
PRICE (Dollars per ticket)
20
18
16
9
09
2
0
0 1
Market A
MR
2 3 4 5 6 7 8
QUANTITY (Admission tickets)
Pricing Policy
Nondiscriminatory
Discriminatory
D
0 10
Total Revenue
(Dollars)
PRICE (Dollars per ticket)
20
18
18
14
12
10
8
4
2
0
0
1
low
Market B
Imagine that at first, Eric charges the same price of $8 per admission in both markets so that the total number of admissions
demanded is
Tickets.
Imagine now that Eric decides to charge a different price in each market. To maximize revenue, Eric…
Susan owns a plot of land in the desert that isn't worth much. One day, a giant meteorite falls on her property, making a large crater. The event attracts scientists and tourists, and Susan decides to sell nontransferable admission tickets to the meteor crater to both types of visitors: scientists (Market A) and tourists (Market B). The following graphs show daily demand ( DD ) curves and marginal revenue ( MRMR ) curves for the two markets. Susan's marginal cost of providing admission tickets is zero.
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- Rajiv owns a plot of land in the desert that isn't worth much. One day, a giant meteorite falls on his property, making a large crater. The event attracts scientists and tourists, and Rajiv decides to sell nontransferable admission tickets to the meteor crater to both types of visitors: scientists (Market A) and tourists (Market B). The following graphs show daily demand (D) curves and marginal revenue (MR) curves for the two markets. Rajiv's marginal cost of providing admission tickets is zero. PRICE (Dollars per ticket) 20 18 16 14 12 10 0 0 3 Market A D₁ MR 6 9 12 15 15 21 24 27 30 QUANTITY (Admission tickets) ? PRICE (Dollars per ticket) 20 18 16 0 0 3 Market B MR D 6 9 12 15 18 21 24 27 QUANTITY (Admission tickets) 30arrow_forwardEconomics Questionarrow_forwardOne of the observations that has been made about the pricing of products produced in an industry where production is highly concentrated is that the costs of production can change up or down and yet prices do not change much. The Sweezy model was developed to explain this observation. Present a Sweezy model, show a cost change, and show that the optimal choice for the firm is to leave the product price unchanged. Provide words to explain the basic reason why the price does not move up or down as costs change.arrow_forward
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- The widget market is competitive and includes no transaction costs. Five suppliers are willing to sell one widget at the following prices: $18, $14, $12, $6, and $3 (one seller at each price). Five buyers are willing to buy one widget at the following prices: $12, $14, $18, $28, and $34 (one buyer at each price). For each price shown in the following table, use the given information to enter the quantity demanded and quantity supplied. Quantity Demanded Quantity Supplied (widgets) (widgets) Price ($ per widget) $3 $6 $12 $14 $18 $28 $34 In this market, the equilibrium price will be per widget, and the equilibrium quantity will be 4 5 0 3 1 2 widgets.arrow_forwardSuppose that a technological innovation decreases BYOB's costs so that it now faces the marginal cost (MC) and average cost (AC) given on the following graph. Specifically, the technological innovation causes a decrease in average fixed costs, thereby lowering the AC curve and moving the MC curve. Place the black point (plus symbol) on the following graph to indicate the profit-maximizing price and quantity for BYOB. If BYOB is making a profit, use the green rectangle (triangle symbols) to shade in the area representing its profit. On the other hand, if BYOB is suffering a loss, use the purple rectangle (diamond symbols) to shade in the area representing the loss. PRICE (Dollars per unit) 4.00 3.50 3.00 2.50 2.00 1.50 1.00 0.50 0 0 MC 0.5 MR AC 1.0 1.5 2.0 2.5 3.0 QUANTITY (Thousands of cans of beer) 3.5 D 4.0 Monopoly Outcome Profit Loss ?arrow_forwardThe widget market is competitive and includes no transaction costs. Five suppliers are willing to sell one widget at the following prices: $26, $14, $10, $5, and $3 (one seller at each price). Five buyers are willing to buy one widget at the following prices: $10, $14, $26, $34, and $42 (one buyer at each price). For each price shown in the following table, use the given information to enter the quantity demanded and quantity supplied. Price Quantity Demanded Quantity Supplied ($ per widget) (widgets) (widgets) $3 $5 $10 $14 $26 $34 $42 In this market, the equilibrium price will be per widget, and the equilibrium quantity will be widgets.arrow_forward
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