Economics: Private and Public Choice (MindTap Course List)
16th Edition
ISBN: 9781305506725
Author: James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher: Cengage Learning
expand_more
expand_more
format_list_bulleted
Question
Chapter 24, Problem 13CQ
(a)
To determine
Total revenue, marginal revenue, fixed cost, and total cost and fill the table.
(b)
To determine
Maximizing profit by charging price of $55.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solutionStudents have asked these similar questions
Gouge-em Cable Company is the only cable television servicecompany licensed to operate in Backwater County. Most of itscosts are access fees and maintenance expenses. These fixed costs total $640,000 monthly. The marginal cost of addinganother subscriber to its system is constant at $2 per month.Gouge-em’s demand curve can be determined from the datain the accompanying table.
a. What price will Gouge-em charge for its cable services?What are its profits at this price?b. Now suppose the Backwater County Public UtilityCommission has the data and believes that cablesubscription rates in the county are too expensive and thatGouge-em’s profits are unfairly high. What regulated pricewill it set so that Gouge-em makes only a normal rate ofreturn on its investment?
Q. STIHL, Inc., manufactures gasoline-powered chain saws for professional, commercial, farm, and consumer markets. To “better serve” their customers, STIHL offers its chain saws in four different quality lines and associated price ranges: occasional use, midrange, professional, and arborist. Under what circumstances could offering multiple qualities of a product be price discrimination? What form of price discrimination might this represent—first-, second-, or third-degree price discrimination? Explain why this practice could increase profit at STIHL.
STIHL, Inc., manufactures gasoline-powered chain saws for professional, commercial, farm, and consumer markets. To “better serve” their customers, STIHL offers its chain saws in four different quality lines and associated price ranges: occasional use, midrange, professional, and arborist.1- Under what circumstances could offering multiple qualities of a product be price discrimination?
2- What form of price discrimination might this represent—first-, second-, or third-degree price discrimination?
3- Explain why this practice could increase profit at STIHL.
Chapter 24 Solutions
Economics: Private and Public Choice (MindTap Course List)
Knowledge Booster
Similar questions
- Ajax Cleaning Products is a medium-sized firm operating in an industry dominated by one large firm—Tile King. Ajax produces a multiheaded tunnel wall scrubber that is similar to a model produced by Tile King. Ajax decides to charge the same price as Tile King to avoid the possibility of a price war. The pnce charged by Tile King is $20,000. Ajax has the following short-run cost curve: TC=800,0005,000Q+100Q2 Compute the marginal cost curve for Ajax. Given Ajaxs pricing strategy, what is the marginal venue function for Ajax? Compute the profit-maximizing level of output for Ajax. Compute Ajaxs total dollar profits.arrow_forwardUnique Creations holds a monopoly position in the production and sale of magnometers. The cost function facing Unique is estimated to beTC = $100,000 + 20Qa. What is the marginal cost for Unique?b. If the price elasticity of demand for Unique is currently –1.5, what price should Unique charge?c. What is the marginal revenue at the price computed in Part (b)?d. If a competitor develops a substitute for the magnometer and the price elasticity increases to –3.0, what price should Unique chargearrow_forwardGive correct typing answer with explanation and conclusion he Puerto Rico Electric Power Authority (PREPA) is a natural monopoly that is unregulated. PREPA maximizes its profit. If PREPA decides to give households a 50 percent discount for second and third connections, how will its economic profit, consumer surplus, and deadweight loss change? A. Its profit will increase, but consumer surplus might increase or decrease. B. It will produce a bigger quantity, but as most sales are at the discount price consumer surplus will increase. C. It will produce a bigger quantity, which will increase consumer surplus and decrease deadweight loss. D. Its profit will increase and both consumer surplus and deadweight loss will decrease.arrow_forward
- Koji Incorporated produces high-end cameras. Its typical camera comes with an array of options. The company has a good brand name. a. Koji distributes its cameras through independent dealers who are given exclusive distribution rights for their respective market areas. Discuss why it might make economic sense for Koji to grant its distributors exclusive territories. b. Since Koji adopted this distribution system, it has experienced a double markup problem. What is a double markup problem? c. Discuss how Koji might use a two-part pricing scheme to reduce the double markup problem. (Be sure to specify what the two-part pricing scheme would entail.) d. Describe one other method that Koji might use to address the double markup problem.arrow_forwardYou own a private parking lot near shard building with a capacity of 600 cars. The demand for parking at this lot is estimated to be Q=1,000 - 2P, where Q is the number of customers with monthly parking passes and P is the monthly parking fee per car. Derive your marginal revenue schedule. What price generates the greatest revenues? Your fixed costs of operating the parking lot, such as the monthly lease paid to the landlord are £25,000 per month. In addition, your insurance company charges you £20 per car per month for liability coverage and the shard building charges you £30 per car per month as part of its policy to discourage the use of private cars in the city centre. What is your profit maximising price?arrow_forwardTechvana is the manufacturer of a new drug which they obtained a patent for. The marginal cost of production is $175 per bottle and the elasticity of demand is estimated to be 1.86. What is the optimal price Techvana should charge for a bottle? $94.09 $113.81 $378.49 $325.5 Grizzly Gear manufactures and sells its top tier snowshoes for $1839. Marginal cost of production per pair is $1100 and fixed cost is $362. What is the markup charged on a pair of snowshoes? $1839 $1477 $377 $739arrow_forward
- Mad Rabbit is a manufacturer and distributer of Royalex hull wilderness canoes. Revenue and cost relations are as follows: TR = $200Q - $0.06Q2 MR = DTR/DQ = $200 - $0.12 Q TC =$75,000 + $6Q + $0.0125Q2 MC= DTC/DQ = $6 + $0.025Q Calculate output, price and profit at the average cost-minimizing activity level. Calculate output, price and profit at the profit-maximizing activity level. Calculate the level of output and price that will maximize sales revenue. What is the profit associated with this activity level? Plot Mad Rabbit's demand curve, marginal revenue curve, marginal cost curve and average cost curve on the same graph (quantity on the horizontal axis). Show your graphical solutions (price, quantity, profit) to parts A, B and C on this grapharrow_forwardUnique Creations holds a monopoly position in the production and sale of magnometers. The Cost function facing Unique is estimated to be TC=$100,000+20Q What is the marginal cost (MC) for Unique? If the price elasticity of demand for Unique is currently -1.5, what price should unique charge? What is the marginal revenue (MR) at the price computed? If a competitor develops a subsitute for the magnometer and the price elasticity increases to -2.25, what price should Unique charge?arrow_forwardwhat is the peak-load pricing model . Why is it used in regulated industries? Give an example to peak-load pricing in regulated industries.arrow_forward
- KidzPoses Inc., a profit-maximizing business, is the only photography business in town that specializes in portraits of small children. James, who owns and runs KidzPoses, expects to encounter an average of eight customers per day, each with a reservation price (shown in the following table). Assume James has no fixed costs, and his cost of producing each portrait is $12. Customer Reservation Price ($ per photo) 1 50 2 46 3 42 4 38 5 34 6 30 7…arrow_forwardDestiny cable has market power in the cable television market in particular locality. The demand curve for Destiny’s output is Qd = 10 - 0.4P P = 23 - 2.5Q Destiny's marginal revenue function is MR(Q) = 25 – 5Q. Destiny's marginal cost curve is MC(Q) = 0.53 + 0.026Q. a) Determine Destiny's profit maximizing price. b) Calculate Destiny's elasticity of demand at this price. Is demand for cable TV elastic, inelastic or unit elastic? c) Given the computed elasticity of demand, if Destiny wants to maximize profit, should it increase, decrease, or leave unchanged its current price? Why?arrow_forwardThe Poster Bed Company believes that its industry can best be classified as monopolistically competitive. An analysis of the demand for its canopy bed has resulted in the following estimated demand function for the bed:P = 1760 - 12QThe cost analysis department has estimated the total cost function for the poster bed asTC = (1/3)Q3 - 15Q2 + 5Q + 24,000a. Calculate the level of output that should be produced to maximize short-run profits. b. What price should be charged? c. Compute total profits at this price-output level. d. Compute the point price elasticity of demand at the profit-maximizing level of output. e. What level of fixed costs is the firm experiencing on its bed production? f. What is the impact of a $5,000 increase in the level of fixed costs on the price charged, output produced, and profit generated?arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- Economics: Private and Public Choice (MindTap Cou...EconomicsISBN:9781305506725Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. MacphersonPublisher:Cengage LearningMicroeconomics: Private and Public Choice (MindTa...EconomicsISBN:9781305506893Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. MacphersonPublisher:Cengage LearningManagerial Economics: Applications, Strategies an...EconomicsISBN:9781305506381Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. HarrisPublisher:Cengage Learning
- Essentials of Economics (MindTap Course List)EconomicsISBN:9781337091992Author:N. Gregory MankiwPublisher:Cengage LearningManagerial Economics: A Problem Solving ApproachEconomicsISBN:9781337106665Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike ShorPublisher:Cengage Learning
Economics: Private and Public Choice (MindTap Cou...
Economics
ISBN:9781305506725
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:Cengage Learning
Microeconomics: Private and Public Choice (MindTa...
Economics
ISBN:9781305506893
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:Cengage Learning
Managerial Economics: Applications, Strategies an...
Economics
ISBN:9781305506381
Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher:Cengage Learning
Essentials of Economics (MindTap Course List)
Economics
ISBN:9781337091992
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