Bundle: Essentials Of Economics, Loose-leaf Version, 8th + Lms Integrated Mindtap Economics, 1 Term (6 Months) Printed Access Card
8th Edition
ISBN: 9781337368087
Author: N. Gregory Mankiw
Publisher: Cengage Learning
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Chapter 7, Problem 8PA
To determine
The
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The following table contains different consumers' values for three software titles: PowerPoint, Excel, and
Word. Suppose there are 100 consumers of each type. It costs Microsoft $0 to produce each piece of
software.
Consumer Types
Administrative Assistants
Marketing/Sales
PowerPoint
Excel
Word
$76
$100
$200
$200
$100
$125
Accountants
$25
$250
$25
A la carte pricing
If Microsoft were to sell each of the software individually, what price should it set for each and what
would its profits on each be?
PowerPoint
Excel
Word
Price per each
%24
2$
%24
Profit on just that software
Total profit on all software
Question 1: Microsoft sells two types of office software, a word processor it calls Word, and a spreadsheet it calls Excel. Both can be produced at zero marginal cost. There are two types of consumers for these products, who exist in roughly equal proportions in the population: authors, who are willing to pay $120 for Word and $40 for Excel, and economists, who are willing to pay $50 for Word and$150 for Excel.
a. Suppose that Microsoft execs decide to sell Word and Excel separately.
What price should Microsoft set for Word? (Hint: Is it better to sell only to authors, or to try to sell to both authors and economists?)What price should Microsoft set for Excel?What will Microsoft’s profit be from a representative group of one author and one economist?b. Suppose that Microsoft decides to bundle together Word and Excel in a package called Office, and not offer them individually.
What price should Microsoft set for the package?How much profit will Microsoft generate from a representative…
It’s increasingly clear that many postings on blogs and product reviews on Web sites are fake or are posted there to manipulate consumers’ opinions. How big a problem is this if consumers increasingly look to consumer-generated product reviews to guide their purchase decisions? What steps, if any, can marketers take to nip this problem in the bud?
Chapter 7 Solutions
Bundle: Essentials Of Economics, Loose-leaf Version, 8th + Lms Integrated Mindtap Economics, 1 Term (6 Months) Printed Access Card
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