3. Suppose the number
of firms you compete with has recently increased. You estimated that as a
result of the increased competition, the demand elasticity has increased from –2
to –3, i.e., you face more elastic demand. You are currently charging
$10 for your product. If
demand elasticity is -3, you should charge [x].
4. An
amusement park, whose customer set is made up of two markets, adults and
children, has developed demand schedules as follows:
The marginal operating cost of each unit of
quantity is $5. Because marginal cost is a constant, so is average variable
cost. Ignore fixed costs. The owners of the amusement part want to
maximize profits.
Price
($)
|
Quantity
|
Adults
|
Children
|
5
|
15
|
20
|
6
|
14
|
18
|
7
|
13
|
16
|
8
|
12
|
14
|
9
|
11
|
12
|
10
|
10
|
10
|
11
|
9
|
8
|
12
|
8
|
6
|
13
|
7
|
4
|
14
|
6
|
2
|
Calculate the price, quantity,
and profit if: The amusement park charges a different price in the adult
market
Please express your answers for Price and Profit in whole
dollars (i.e.10.00)
Please use whole numbers for Quanitity (i.e. 10, 27, 4)
Price
|
Quantity
|
Total
Revenue
|
Marginal
Revenue
|
Marginal
Cost
|
Total
Cost
|
MR-MC
|
Profit
|
Blank
1
|
6
|
84
|
|
5
|
30
|
|
34
|
13
|
Blank
2
|
91
|
7
|
5
|
35
|
2
|
56
|
12
|
8
|
96
|
5
|
5
|
40
|
0
|
Blank
3
|
Blank
4
|
9
|
99
|
3
|
5
|
45
|
-2
|
54
|
10
|
Blank
5
|
100
|
1
|
5
|
50
|
-4
|
50
|
9
|
11
|
99
|
-1
|
5
|
55
|
-6
|
Blank
6
|
Blank
7
|
12
|
96
|
-3
|
5
|
60
|
-8
|
36
|
7
|
Blank
8
|
91
|
-5
|
5
|
65
|
-10
|
26
|
6
|
14
|
84
|
-7
|
5
|
70
|
-12
|
Blank
9
|
5
|
15
|
75
|
-9
|
5
|
75
|
-14
|
0
|
5. An
amusement park, whose customer set is made up of two markets, adults and
children, has developed demand schedules as follows:
The marginal operating
cost of each unit of quantity is $5. Because marginal cost is a constant, so is
average variable cost. Ignore fixed costs. The owners of the amusement
part want to maximize profits.
Price
($)
|
Quantity
|
Adults
|
Children
|
5
|
15
|
20
|
6
|
14
|
18
|
7
|
13
|
16
|
8
|
12
|
14
|
9
|
11
|
12
|
10
|
10
|
10
|
11
|
9
|
8
|
12
|
8
|
6
|
13
|
7
|
4
|
14
|
6
|
2
|
Calculate the
price, quantity, and profit if: The amusement park charges a different price
in the child’s market
Please express your answers for
Price and Profit in whole dollars (i.e.10.00)
Please use whole numbers for
Quanitity (i.e. 10, 27, 4)
Price
|
Quantity
|
Total
Revenue
|
Marginal
Revenue
|
Marginal
Cost
|
Total
Cost
|
MR-MC
|
Profit
|
14
|
2
|
28
|
|
5
|
10
|
|
Blank 1
|
13
|
Blank
2
|
52
|
12
|
5
|
20
|
7
|
32
|
Blank 3
|
6
|
72
|
10
|
5
|
30
|
5
|
42
|
11
|
8
|
88
|
8
|
5
|
40
|
3
|
48
|
10
|
10
|
100
|
6
|
5
|
50
|
1
|
Blank
4
|
9
|
Blank
5
|
108
|
4
|
5
|
60
|
-1
|
48
|
Blank 6
|
14
|
112
|
2
|
5
|
70
|
-3
|
42
|
7
|
16
|
112
|
0
|
5
|
80
|
-5
|
Blank
7
|
6
|
Blank
8
|
108
|
-2
|
5
|
90
|
-7
|
18
|
Blank 9
|
20
|
100
|
-4
|
5
|
100
|
-9
|
0
|
6. An
amusement park, whose customer set is made up of two markets, adults and
children, has developed demand schedules as follows:
The marginal operating cost of each unit of
quantity is $5. Because marginal cost is a constant, so is average variable
cost. Ignore fixed costs. The owners of the amusement part want to
maximize profits.
Price
($)
|
Quantity
|
Adults
|
Children
|
5
|
15
|
20
|
6
|
14
|
18
|
7
|
13
|
16
|
8
|
12
|
14
|
9
|
11
|
12
|
10
|
10
|
10
|
11
|
9
|
8
|
12
|
8
|
6
|
13
|
7
|
4
|
14
|
6
|
2
|
Calculate the price, quantity,
and profit if: The amusement park charges the same price in the two markets combined
Please express your answers for Price and Profit in whole
dollars (i.e.10.00)
Please use whole numbers for Quanitity (i.e. 10, 27, 4)
Price
|
Quantity
|
Total
Revenue
|
Marginal
Revenue
|
Marginal
Cost
|
Total
Cost
|
MR-MC
|
Profit
|
14
|
8
|
112
|
|
5
|
40
|
|
72
|
Blank
1
|
11
|
143
|
10.33
|
5
|
55
|
5.33
|
88
|
12
|
Blank
2
|
168
|
8.33
|
5
|
70
|
3.33
|
98
|
11
|
17
|
187
|
6.33
|
5
|
85
|
1.33
|
Blank
3
|
Blank
4
|
20
|
200
|
4.33
|
5
|
100
|
-0.67
|
100
|
9
|
Blank
5
|
207
|
2.33
|
5
|
115
|
-2.67
|
92
|
8
|
26
|
208
|
0.33
|
5
|
130
|
-4.67
|
Blank
6
|
Blank
7
|
29
|
203
|
-1.67
|
5
|
145
|
-6.67
|
58
|
6
|
Blank
8
|
192
|
-3.67
|
5
|
160
|
-8.67
|
Blank
9
|
5
|
35
|
175
|
-7.67
|
5
|
190
|
-12.67
|
-38
|
7. Explain
the difference in the profit realized under the two situations (the price in
each market or in the two markets combined.)
Make sure you include the profit
with and without price discrimination in your answer.
8. Time
Warner could offer the History Channel (H) and Showtime (S) individually or as
a bundle of both.
Suppose the reservation prices of
customers 1 and 2 (the highest prices they are willing to pay) are presented in
the boxes below.
The cost to Time Warner is $1 per
customer for licensing fees.
Preferences
|
Showtime
|
History Chanel
|
Customer 1
|
9
|
2
|
Customer 2
|
3
|
8
|
Should Time Warner bundle or sell
separately? Your answer needs to include the unbundled and bundled profits.
9. Suppose
Time Warner could sell Showtime for $9, and History channel for $8, while
making Showtime-History bundle available for $13. Should it use mixed bundling.
i.e., sells products both separately and as a bundle?
Your answer must include the profit
with mixed bundling.
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