Economics (6th Edition)
6th Edition
ISBN: 9780134105956
Author: Hubbard
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Question
Chapter 16, Problem 16.3.9PA
Sub part (a):
To determine
Sub part (b):
To determine
Price strategy after the first year.
Sub part (c):
To determine
Will there be any change in pricing strategy of tickets.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solutionStudents have asked these similar questions
In 1896, Colgate dental cream was introduced in tubes similar to those we use now. Today, the Colgate-Palmolive Company’s brand of toothpaste is the best-selling toothpaste in the world (ahead of the Crest brand marketed by Procter & Gamble, which was introduced in 1955). While Colgate and Crest enjoy the lion’s share of the toothpaste market, if you view the oral care shelf at your local drugstore or supermarket, you will find over a hundred different varieties of toothpaste. Colgate alone sells over 40 different varieties that are marketed under names ranging from Shrek Bubble Fruit to Colgate Total Advanced Whitening.
The high level of product differentiation in the toothpaste market stems from firms introducing new varieties in an attempt to boost their economic profits. In environments where makers of other brands (such as Crest) can easily enter profitable segments of the market, a profitable strategy is to attempt to quickly cover that segment (introducing Shrek Bubble…
The figure below illustrates the market for steel. If the steel market is competitive, firms can produce steel at a constant marginal cost of $100 per ton. Therefore, the price of steel is $100 per ton, and 100 tons are produced. Assume that if all the steel companies consolidate into a monopoly, the monopoly marginal cost will fall to $70 per ton. Use the straight line tool to draw the monopoly marginal revenue and marginal cost lines (extend the marginal cost line to 300 tons). Then use the plot point tool to plot the monopoly profit maximizing price and output on the demand curve.
Part 2.
If the market is competitive, total surplus is $ _________
Part 3.
If the market is controlled by a monopoly, total surplus is $________
Suppose that there are two fancy hotels on the online booking platform, say W hotel and Ritz Carlton hotel. Each hotel has the capacity of 20 rooms on the New Year Eve. There are 20 families who are planning to stay at Bay Areas.
Suppose that you are the manager and you set the price to maximize the hotel profit.
The marginal cost of each hotel room = 500 RMB
The largest valuation on the hotel room = 2000 RMB valuation decrease by 100RMS. In total, there are 20 families.
Discuss with your peers how many rooms you will offer in the market.
Chapter 16 Solutions
Economics (6th Edition)
Ch. 16 - Prob. 16.1.1RQCh. 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 2015, the Rock and Roll Hall of Fame and Museum...Ch. 16 - Prob. 16.2.3RQCh. 16 - Prob. 16.2.4RQ
Ch. 16 - Prob. 16.2.5RQCh. 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. 16.2.16PACh. 16 - Prob. 16.2.17PACh. 16 - Prob. 16.2.18PACh. 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. 16.3.12PA
Knowledge Booster
Similar questions
- Verizon can be viewed as a first mover. Now suppose both ATT and Verizon are considering whether and how to enter a potential market. Market demand is given by the inverse demand function p= 900−q1−q2, where p is the market price margin, q1 is the quantity sold by Verizon and q2 is the quantity sold by ATT. To enter the market, a retailer must build a store. Two types of stores can be built: Small and Large. The Small store requires an investment of $50,000, and it allows the retailer to sell as many as 100 units of the goods at zero marginal cost. Alternatively, they can pay $175,000 to construct a Large store that will allow it to sell any number of units at zero marginal cost. Assume Verizon enters and builds a Large store (i.e. chooses to build a Large store L1 at the first stage.) Calculate Verizon's profit for the following cases: a.) ATT chooses not to enter N at the second stage after viewing Verizon's choice. b.) ATT chooses to build a Small store S at the second stage…arrow_forwardVerizon can be viewed as a first mover. Now suppose both ATT and Verizon are considering whether and how to enter a potential market. Market demand is given by the inverse demand function p= 900−q1−q2, where p is the market price margin, q1 is the quantity sold by Verizon and q2 is the quantity sold by ATT. To enter the market, a retailer must build a store. Two types of stores can be built: Small and Large. The Small store requires an investment of $50,000, and it allows the retailer to sell as many as 100 units of the goods at zero marginal cost. Alternatively, they can pay $175,000 to construct a Large store that will allow it to sell any number of units at zero marginal cost. Assume Verizon stays out of the potential market (i.e. chooses not to enter N1 at the first stage, q1= 0). Calculate Verizon's profit for the following cases: a.) ATT chooses not to enter N at the second stage after viewing Verizon's choice. b.) ATT chooses to build a Small store S at the second stage…arrow_forwardSuppose, Pfizer Company is the only company allowed by the Sultanate government to sell COVID vaccine in Oman. According to you, what type of market Pfizer Company is having in Oman? a. Monopoly market b. Monopolistic market c. Competitive market d. Oligopoly marketarrow_forward
- Suppose you manage a large company’s marketing department and are responsible for deciding whether or not to advertise in the Super Bowl. Your team of analysts estimate that for each advertisement, your firm would generate $6 million in additional revenue for the company. It cost $7 million to run a 30-second advertisement. Therefore, your company would expect to lose $1 million in profit for each advertisement. a) Explain why it could still be worthwhile to purchase an advertisement, even though you know in advance that your company would lose $1 million in profit? b)Depict this situation with a game theory payoff matrix. Your company (A) and a major competitor (B) have two potential strategies: to advertise or to not advertise during the Super Bowl. The payoffs in each cell represent the change in firm profits from advertising. Create payoffs in each cell such that the Nash equilibrium is that both firms advertise despite having a higher profit if neither firm advertised.arrow_forwardNile.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 before the 10% discount 1.55 million 1.50 million Volume of sales after the 10% discount 1.65 million 1.70 million 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?arrow_forwardMySpace, Facebook, email, and collaborative sites for both work and leisure are a norm on the net these days. But did you know all of the content you post on many of these sites immediately become partially owned by the sites themselves? And, taking items away by deleting them never really gets rid of them. In fact, in Groundswell by Bernoff and Li, they state that trying to take something off the Internet that you have posted is like trying to remove pee from a pool. Scott McNealy, founder of Sun Microsystems, perhaps sums it up best, “You have zero privacy anyway. Get over it.â Keep in mind that technology is everywhere all the time (ubiquitous) because of the onset of smartphones, and other mobile devices. You have a 21st century phenomenon. But, is what Scott McNealy said true? Cite and explain examples that support and argue against this statement.arrow_forward
- Monopoly outcome versus perfectly competitive outcome Consider the daily market for hot dogs in a small city. Suppose that this market is in long-run perfectly competitive equilibrium, with many hot dog stands in the city, each one selling the same kind of hot dogs. Therefore, each vendor is a price taker and possesses no market power. The following graph shows the demand (D) and supply curves (S = MC) in the market for hot dogs. Place the black point (plus symbol) on the graph to indicate the market price and quantity that will result from perfect competition. Use the green point (triangle symbol) to shade the area that represents consumers’ surplus, and use the purple point (diamond symbol) to shade the area that represents producers’ surplus. (graph 1) Assume that one of the hot dog vendors successfully lobbies the city council to obtain the exclusive right to sell hot dogs within the city limits. This firm buys up all the rest of the hot dog vendors in the city and…arrow_forwardAuctioneers in the state of Nebraska need to get a license from the State in order to operate. Suppose the license has a one-time fee of $50,000. Once the license is granted, the state of Nebraska allows the auctioneer to sell the license to others at any price. But, if the auctioneer wants to, the auctioneer can give up his/her license AT ANY TIME and get a $40,000 refund from the state of Nebraska. Samantha recently paid $50,000 for the auctioneer’s license but is having second thoughts. So, she spends $5,000 on advertising hoping to get $42,500 for the license. Using all of the information above, what is Samantha’s sunk costs? Using ONLY the ABOVE INFORMATION. Assuming that Samantha has not sold the license yet , do you think the Samantha made a wise move to spend $5,000 on advertising hoping to get $42,500 for the license? Explain why or why not? After a very long wait, suppose Samantha gets an offer of $41,500 for the license. 3. Should Samantha accept the offer? Why or…arrow_forwardSuppose Grady, Grace, and George own the 3 wrecker services in the small town of Collisionville. Each currently charges $350 for a standard towing job within town. Competition is heating up and each wants to grow their market share. Use this information to answer the following: What does the Law of Demand say that Grace can do to grow her market share? Suppose that the Kinked Demand Curve Theory describes this market well. How would considering this theory impact Grace’s decision on part 1?arrow_forward
- Recently, Pfizer and Allergan—the makers of Viagra and Botox, respectively—initiated a $160 billion merger. Pharmaceutical companies tend to spend a greater percentage of sales on R&D activities than other industries. The government encourages these R&D activities by granting companies patents for drugs approved by the Food and Drug Administration. For instance, Allergan spent large sums of money developing its popular wrinkle-removing neurotoxin, Botox, which is currently protected under a patent. Botox sells for about $15 per vial. Calculate the Lerner index if the marginal cost of producing Botox is $1.50 per vial. Does the Lerner index make sense in this situation?arrow_forwardNile.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 before the 10% discount 1.55 million 1.50 million Volume of sales after the 10% discount 1.65 million 1.70 million Using the midpoint method, calculate the price elasticities of demand for group A and group B.arrow_forwardThis case study focuses on the pay-for-viewing TV (Pay TV in short) industry in Australia. Back in 2013, Foxtel had just finished acquiring Austar, its major competitor. Foxtel was enjoying near-total dominance in the market. There were other players such as Optus TV and iiNet, however, their market shares were dwarfed by that of Foxtel. IBISWorld reported that Foxtel occupied 92.6% of the market share in 2013. Then in March 2015, Netflix Australia was launched, opening the gate for an influx of other subscription video-on-demand (SVOD) services. These new services were internet-based, which differed from Foxtel’s model of cable TV. Nevertheless, they competed fiercely for subscribers. Fast forward to the present day (October 2021), Australian consumers now have a wealth of choices of the content offered by Foxtel, Netflix, Stan, Amazon Prime, Apple TV, Disney+, Optus Sport, and the recently launched Paramount+ (launched in August 2021). Questions: Draw a firm diagram to illustrate…arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- Principles of Economics (12th Edition)EconomicsISBN:9780134078779Author:Karl E. Case, Ray C. Fair, Sharon E. OsterPublisher:PEARSONEngineering Economy (17th Edition)EconomicsISBN:9780134870069Author:William G. Sullivan, Elin M. Wicks, C. Patrick KoellingPublisher:PEARSON
- Principles of Economics (MindTap Course List)EconomicsISBN:9781305585126Author:N. Gregory MankiwPublisher:Cengage LearningManagerial Economics: A Problem Solving ApproachEconomicsISBN:9781337106665Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike ShorPublisher:Cengage LearningManagerial Economics & Business Strategy (Mcgraw-...EconomicsISBN:9781259290619Author:Michael Baye, Jeff PrincePublisher:McGraw-Hill Education
Principles of Economics (12th Edition)
Economics
ISBN:9780134078779
Author:Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:9780134870069
Author:William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:PEARSON
Principles of Economics (MindTap Course List)
Economics
ISBN:9781305585126
Author:N. Gregory Mankiw
Publisher: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
Managerial Economics & Business Strategy (Mcgraw-...
Economics
ISBN:9781259290619
Author:Michael Baye, Jeff Prince
Publisher:McGraw-Hill Education