Pearson eText Microeconomics -- Access Card
7th Edition
ISBN: 9780136850045
Author: Hubbard, Glenn, O'Brien, Anthony
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Question
Chapter 16, Problem 16.3.11PA
To determine
Comparing pricing strategies.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solutionStudents have asked these similar questions
Identify nine common pricing methods.
Asim's HookNLadder is the only company selling fire engines in the fictional country of Alexandrina. Asim initially produced eight trucks, but then
decided to increase production to nine trucks. The following graph gives the demand curve faced by Asim's HookNLadder. As the graph shows, in order
to sell the additional fire truck, Asim must lower the price from $80,000 to $40,000 per truck. Notice that Asim gains revenue from the sale of the
additional engine, but at the same time, he loses revenue from the initial eight engines because they are all sold at the lower price.
Use the purple rectangle (diamond symbols) to shade the area representing the revenue lost from the initial eight engines by selling at $40,000 rather
than $80,000. Then use the green rectangle (triangle symbols) to shade the area representing the revenue gained from selling an additional engine at
$40,000.
PRICE (Thousands of dollars per fire engine)
220
Asim
200
180
160
140
120
100
80
60
40
20
0
0
1
True
2
False
4 5…
Asim's HookNLadder is the only company selling fire engines in the fictional country of Alexandrina. Asim initially produced eight trucks, but then decided to increase production to nine trucks. The following graph gives the demand curve faced by Asim's HookNLadder. As the graph shows, in order to sell the additional fire truck, Asim must lower the price from $75,000 to $50,000 per truck. Notice that Asim gains revenue from the sale of the additional engine, but at the same time, he loses revenue from the initial eight engines because they are all sold at the lower price.
Use the purple rectangle (diamond symbols) to shade the area representing the revenue lost from the initial eight engines by selling at $50,000 rather than $75,000. Then use the green rectangle (triangle symbols) to shade the area representing the revenue gained from selling an additional engine at $50,000.
Chapter 16 Solutions
Pearson eText Microeconomics -- Access Card
Ch. 16 - What is the law of one price? What is arbitrage?Ch. 16 - Prob. 16.1.2RQCh. 16 - Prob. 16.1.3PACh. 16 - Prob. 16.1.4PACh. 16 - Prob. 16.1.5PACh. 16 - Prob. 16.1.6PACh. 16 - Prob. 16.2.1RQCh. 16 - In 2017, the Rock and Roll Hall of Fame and Museum...Ch. 16 - Prob. 16.2.3RQCh. 16 - Prob. 16.2.4PA
Ch. 16 - Lexmark charges lower prices for its printer...Ch. 16 - Prob. 16.2.6PACh. 16 - Prob. 16.2.7PACh. 16 - Prob. 16.2.8PACh. 16 - Prob. 16.2.9PACh. 16 - Prob. 16.2.10PACh. 16 - Prob. 16.2.11PACh. 16 - Prob. 16.2.12PACh. 16 - Prob. 16.2.13PACh. 16 - Prob. 16.2.14PACh. 16 - Prob. 16.2.15PACh. 16 - Prob. 16.3.1RQCh. 16 - Prob. 16.3.2RQCh. 16 - Prob. 16.3.3RQCh. 16 - Prob. 16.3.4PACh. 16 - Prob. 16.3.5PACh. 16 - Prob. 16.3.6PACh. 16 - Prob. 16.3.7PACh. 16 - Prob. 16.3.8PACh. 16 - Prob. 16.3.9PACh. 16 - Prob. 16.3.10PACh. 16 - Prob. 16.3.11PACh. 16 - Prob. 16.3.12PACh. 16 - Prob. 16.2CTECh. 16 - Prob. 16.3CTE
Knowledge Booster
Similar questions
- Can you answer thisarrow_forwardConsider the pharmaceutical company Mylan that produces epinephrine injection devices called EpiPens. In the presence of other firms producing substitutes for this good, the price of EpiPens is $150. Now suppose that competitors to Mylan no longer produce epinephrine injection devices, so Mylan now has pricing power in this market. As the economist on staff at Mylan, you are charged with the task of figuring out what your company's new pricing strategy should be. The following graph shows the marginal cost (MC), which is assumed to be constant, and the average total cost (ATC) of Mylan. The graph also shows the demand curve (D) for EpiPens and the marginal revenue curve (MR) once the firm has market power. On the graph, use the grey point (star symbol) to indicate the quantity of EpiPens demanded if Mylan continues to charge $150. Dashed drop lines will automatically extend to both axes. 1000 900 800 Qp at $150 700 600 Profit Max 500 400 ATC at Profit Max 300 ATC 200 Profit MC 100 MR 2…arrow_forwardConsider the pharmaceutical company Mylan that produces epinephrine injection devices called EpiPens. In the presence of other firms producing substitutes for this good, the price of EpiPens is $150. Now suppose that competitors to Mylan no longer produce epinephrine injection devices, so Mylan now has pricing power in this market. As the economist on staff at Mylan, you are charged with the task of figuring out what your company's new pricing strategy should be. The following graph shows the marginal cost (MC), which is assumed to be constant, and the average total cost (ATC) of Mylan. The graph also shows the demand curve (D) for EpiPens and the marginal revenue curve (MR) once the firm has market power. On the graph, use the grey point (star symbol) to indicate the quantity of EpiPens demanded if Mylan continues to charge $150. Dashed drop lines will automatically extend to both axes. PRICE (Dollars per EpiPen) 1000 900 800 700 600 500 400 300 200 100 0 0 1 MR 4 2 3 7 5 6 QUANTITY…arrow_forward
- Consider the pharmaceutical company Mylan that produces epinephrine injection devices called EpiPens. In the presence of other firms producing substitutes for this good, the price of EpiPens is $150. Now suppose that competitors to Mylan no longer produce epinephrine injection devices, so Mylan now has pricing power in this market. As the economist on staff at Mylan, you are charged with the task of figuring out what your company's new pricing strategy should be. The following graph shows the marginal cost (MC), which is assumed to be constant, and the average total cost (ATC) of Mylan. The graph also shows the demand curve (D) for EpiPens and the marginal revenue curve (MR) once the firm has market power. On the graph, use the grey point (star symbol) to indicate the quantity of EpiPens demanded if Mylan continues to charge $150. Dashed drop lines will automatically extend to both axes. 1000 900 9, at $150 800 700 600 Profit Max 500 400 ATC at Profit Max 300 200 ATC Profit 100 MC- MR…arrow_forwardQuestion 5: Jimmy has a room that overlooks, from some distance, a major league baseball stadium. He decides to rent a telescope for $50 a week and charge his friends and classmates to use it to peep at the game for 30 seconds. He can act as a monopolist for renting out "peeps". For each person who takes a 30 second peep, it costs Jimmy $.20 to clean the eyepiece. Jimmy believes he has the following demand for his service: Price of a Peep $1.20 Quantity of peeps demanded 1.00 90 100 150 200 250 300 70 60 50 350 40 30 400 450 20 10 500 550 a) For each price, calculate the total revenue from selling peeps and themarginal revenue per peep. Price Quantity TR MR $1.20 100 90 100 150 200 70 250 60 300 350 50 40 30 400 450 20 500 10 550 b) At what quantity will Jimmy's profit be maximized? What price will he charge? What will his total profit be? c) Jimmy's landlady complains about all the visitors coming into the building and tells Jimmy to stop selling peeps. Jimmy discovers, though, if he…arrow_forwardFemi's HookNLadder is the only company selling fire engines in the fictional country of Alexandrina. Femi Initially produced five trucks, but then decided to increase production to six trucks. The following graph gives the demand curve faced by Femi's HookNLadder. As the graph shows, in order to sell the additional fire truck; Femi must lower the price from $160,000 to $120,000 per truck. Notice that Femi gains revenue from the sale of the additional engine, but at the same time, he loses revenue from the initial five engines because they are all sold at the lower price. Use the purple rectangle (diamond symbols) to shade the area representing the revenue lost from the initial five engines by selling at $120,000 rather than $160,000. Then use the green rectangle (triangle symbols) to shade the area representing the revenue gained from selling an additional engine at $120,000. PRICE (Thousands of dollars per fire engine) 8 8 2 2 2 2 8 2 2 2 20 220 200 180 160 140 120 100 60 40 0 2 3…arrow_forward
- Suppose that The University of Memesland (UM) and Memesland University of Technology (MUT) are the only two universities in Australia that provide online courses to students. Recently they have faced new, international competition, such as the American low- cost university, Horvord. Horvord specialises in providing online courses at a discount to students if they purchase many courses with Horvord. Select the item from the list provided to make the following statements true. When compared to UM and MUT, Horvord could be argued to be engaging in discrimination. price Before Horvord existed, UM and MUT existed in a state of strategic competition, and they both chose dominant strategies that resulted in significant losses for both of them. They were likely facing a If UM decides to offer courses at a discounted price to people under 25 years old, this could be described as price discrimination. 1. first degree 2. second degree 3. peak load pricing 4. pricing power 5. arbitrage 6.…arrow_forward12arrow_forwardAt a price $12 per unit, Gadgets incorporated is willing to supply 24,000 gadgets, while United Gadgets is willing to supply 16,000 gadgets. If the price were to rise to $15 per unit, their respective quantities supplied would rise to 27,000 and 21,000. If these are the only two firms supplying gadgets, what is the elasticity of supply in the market for gadgets?arrow_forward
- Alex Potter owns the only well in a town that produces clean drinking water. He faces the following demand P=100-Q, and marginal cost MC=20+2Q, marginal revenue MR= 100-2Q curves. In order to maximize profits, Alex should charge a price of $60 at the profit maximizing quantity with a marginal revenue equal to $60. $60 at the profit maximizing quantity with a marginal revenue equal to $80. $80 at the profit maximizing quantity with a marginal revenue equal to $80. $80 at the profit maximizing quantity with a marginal revenue equal to $60.arrow_forwardDifferentiate geographical pricing from psychological pricing.arrow_forwardPlease circle the answer so that I can understand. Specify each part to which answer it is related. If you write by hand, please write clearly so that I can understand. I appreciate your cooperation. Please answer the question. Please be careful in your answer and there are many times you answer wrongly.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- Managerial Economics: A Problem Solving ApproachEconomicsISBN:9781337106665Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike ShorPublisher:Cengage Learning
- Economics (MindTap Course List)EconomicsISBN:9781337617383Author:Roger A. ArnoldPublisher:Cengage Learning
Managerial Economics: A Problem Solving Approach
Economics
ISBN:9781337106665
Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:Cengage Learning
Economics (MindTap Course List)
Economics
ISBN:9781337617383
Author:Roger A. Arnold
Publisher:Cengage Learning