Managerial Economics & Business Strategy (Mcgraw-hill Series Economics)
9th Edition
ISBN: 9781259290619
Author: Michael Baye, Jeff Prince
Publisher: McGraw-Hill Education
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Chapter 8, Problem 23PAA
To determine
To find: Whether the firm should increase or decrease firm’s level of advertising.
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You have been appointed the new manager for Ghana Airways Company Limited, an international airline company that flies from the Kotoka International Airport in Accra to Heathrow Airport in London every day. The airline is described as a monopolist and has the possibility of discriminating between its Business and Economy Travelers. To help you determine the prices your services appropriately to maximise profit, you engaged an economist who estimated the demand function for both Economy and Business Travelers as:
Q1 = 24 – 0.2P1 Economy Travelers
Q2 = 10 – 0.05P2 Business Travelers
Where Q1 and Q2 are the respective numbers of Economy and Business Travelers and P1 and P2 are their respective fares (in GH¢). If the Total Cost (TC) of this airline company for flying these two categories of travellers is given as TC = 35 + 40Q, where Q = Q1 + Q2.
What can you say about the fares, number of travellers and profit of Ghana Airways Company Limited, with and without price discrimination
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You are the manager of an organization in America that distributes blood to hospitals in all 50 states and the District of Columbia. A recent report indicates that nearly 50 Americans contract HIV each year through blood transfusions. Although every pint of blood donated in the United States undergoes a battery of nine different tests, existing screening methods can detect only the antibodies produced by the body’s immune system—not foreign agents in the blood. Since it takes weeks or even months for these antibodies to build up in the blood, newly infected HIV donors can pass along the virus through blood that has passed existing screening tests. Happily, researchers have developed a series of new tests aimed at detecting and removing infections from donated blood before it is used in transfusions. The obvious benefit of these tests is the reduced incidence of infection through blood transfusions. The report indicates that the current price of decontaminated blood is $60 per pint.…
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Managerial Economics & Business Strategy (Mcgraw-hill Series Economics)
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