6. Individual Problems 14-6 At a student café, there are equal numbers of two types of customers with the following values. The café owner cannot distinguish between the two types of students because many students without early classes arrive early anyway (1.e., she cannot price-discriminate). Coffee Banana Students with Early Classes Students without Early Classes 67 57 46 96 The marginal cost of coffee is 5 and the marginal cost of a banana is 20. The café owner is considering three pricing strategies: 1. Mixed bundling: Price bundle of coffee and a banana for 153, or just a coffee for 67. 2. Price separately: Offer coffee at 57, price a banana at 96. 3. Bundle only: Coffee and a banana for 113. Do not offer goods separately.

6. Individual Problems 14-6 At a student café, there are equal numbers of two types of customers with the following values. The café owner cannot distinguish between the two types of students because many students without early classes arrive early anyway (1.e., she cannot price-discriminate). Coffee Banana Students with Early Classes Students without Early Classes 67 57 46 96 The marginal cost of coffee is 5 and the marginal cost of a banana is 20. The café owner is considering three pricing strategies: 1. Mixed bundling: Price bundle of coffee and a banana for 153, or just a coffee for 67. 2. Price separately: Offer coffee at 57, price a banana at 96. 3. Bundle only: Coffee and a banana for 113. Do not offer goods separately.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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4. A firm produces two products, the demands for which are independent. Both products have zero marginal cost. The firm faces four consumers with the following reservation prices: Consumer 1 2 3 4 Good 1 25 40 80 100 e. Good 2 100 80 40 25 a. Show the optimal price and quantity of Good 1 (unbundled) on a graph with the firm's demand and marginal revenue. b. Show the optimal price and quantity of the bundle (Goods 1 and 2) on a graph with the firm's demand and marginal revenue (for the bundle). c. Should the firm bundle these goods? Compare the firm's profits under both scenarios. d. Which approach do consumers prefer? Compare consumer surplus under both scenarios. Now suppose that MC = 30. Reassess the optimal prices, quantities, and profit with and without bundling.
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4. A monopolist is faced with the following cost and revenue curves: $ 80 70 60 50 40 30 20 10 0 -10 0 -20 100 200 300 400 FMC 500 AC AR 600 MR Quantity (a) What is the maximum-profit output?. (b) What is the maximum-profit price? (c) What is the total revenue at this price and output? (d) What is the total cost at this price and output? (e) What is the level of profit at this price and output? (f) If the monopolist were ordered to produce 300 units, what would be the market price? (g) How much profit would now be made? (h) If the monopolist were faced with the same demand, but average costs were constant $60 per unit, what output would maximise profit? (i) What would be the price now? (j) How much profit would now be made? (k) Assume now that the monopolist decides not to maximise profits, but instead sets a price of $40. How much will now be sold?.
2. XYZ Company is specialized in mangoes distribution in the city of Muscat. Sales are 450 boxes (unit) per month. It costs OR 10 to make and receive an order and holding cost is OR 3.5 per box per year. The prices depend on quantities purchased such that the order quantities from 1 to 199 at a unit price RO 5; quantity 200 to 499 at a unit price 4.5 RO; and quantity 500 and more at a per unit price of 4 RO. If the discount option is considered, then the best decision that minimizes the total annual inventory cost is? a. 185 units, Total cost = 30,649 b. None is correct c. 450 units, Total cost = 23,500 O d. 500 units, Total cost = 22,583 e. 200 units, Total cost = 27,240
7) Candice wants to sell two types of chocolate bars, Dark (D) and White (W) to three consumers: A, B, and C. Each consumer's reservation price for each bar is given in the figure below. Candice purchases each bar at a cost of 1. Candice considers practicing either pure or mixed bundling. What is the maximum profits Candice can earn? BC 0 3 2 2 A Dark White 3
250 225 Revenue Lost 200 175 150 Revenue Gained 125 Demand 100 75 50 25 3 4 7 8 9. 10 QUANTITY (Fire engines) Gilberto increase production from 7 to 8 fire engines because the dominates in this scenario. True or False: If Gilberto's Fire Engines were a competitive firm instead and $100,000 were the market price for an engine, decreasing its price from $100,000 to $50,000 would result in the same change in the production quantity and, thus, total revenue. O True O False acer Σ 2. 1. PRICE (Thousands of dollars per fire engine)
Quantity of Miami Dade Shades 1st pair 2nd pair 3rd pair 4th pair Marginal Cost (dollars) producer surplus will equal $105. there will be a surplus; as a result, the price will fall to $95. $60 95 140 185 Refer to Table 4-4. The table above lists the marginal cost of sunglasses by Miami Dade Shades, a firm that specializes in producing designer sunglasses. If the market price for a pair of Miami Dade Shades sunglasses is $130, A they will produce three pairs. B producer surplus from the first pair is $35.
2. Monopoly, Practice Question Firm P is a monopolist for a new drug that makes people feel thinner. the total cost function is C(Q) = 200 + 10Q + Q² The inverse demand function is p(Q) = 82 - Q (a) By how much do revenues increase if this firm sells one more (small) unit of output? By how much does its cost go up if it produces one more (small) unit of output? (b) What is the optimal price and quantity the monopolist should charge and sell? (c) What is the profit the monopolist makes? Should the firm shut down in the short or long run? (d) If the company increases its price by a small fraction (let us say 1%), by what proportion does demand go down? [Round to two decimal places.] (e) What percentage of the price is due to costs and what is due to markup? [Round to two decimal places.] (f) What is the deadweight loss of the monopoly pricing compared to competitive prices?
Table 17-2 The information in the table depicts the total demand for wireless Internet subscriptions in a small urban market. Assume that each wireless Internet operator pays a fixed cost of $100,000 (per year) to provide wireless Internet in the market area and that the marginal cost of providing the wireless Internet service to a household is zero. Quantity 0 2000 4000 6000 8,000 Price (per year) $180 $150 $120 $90 $60 10,000 $30 12,000 $0 Refer to Table 17-2. Assume that there are two profit-maximizing wireless Internet companies operating in this market. Further assume that they are not able to "collude" on price and quantity of wireless Internet subscriptions to sell. How many wireless Internet subscriptions will be collectively sold (by both firms) when this market reaches a Nash equilibrium? Oa. 2000 Ob.4000 OC. 6000 O d. 58000
Figure 14-9 Price $29 Po Pa P₂ P₂ Ps Q & a. (P5- P4) × Q3 b. (P5- P3) x Q3 OC. (P5- P4) × Q2 . d. (PS- P3) x Q2 * AVC ATC 6₂ Q₂ Quantity Refer to Figure 14-9. When market price is P5, which area represents a profit-maximizing firm's profits?
The following graph depicts the costs incurred by a Local egg seller, Rahim. Rahim is faced with strong competitors who are selling exactly the same product. Use the graph to answer the following questions- Price/Cost per egg MC 12 ATC MR3 AVC MR2 MR1 Quantity 100 200 300 400 a)lf the market price per egg is 8tk, in order to maximize profit how many eggs does Rahim sell? b)lf the price stays at 8tk, what happens in the long run? choose from the following options. option 1: Rahim stops selling eggs. option 2 : New firms enter into the egg market option 3: all existing sellers suffer from an economic loss. c)lf the price falls down to 3tk price, which of the following option does Rahim have in short run? option1: Temporarily shutting down the business business option 2 : staying in generating no profit option 3: indifferent between staying in and going Out of the market. but