21. (Advanced Material) If airlines found that the number of no-shows starts to increase, then its policyfor optimal overbooking would tend to:a. make them reduce the amount of overbooking.b. cause them to increase the amount of overbooking.c. let them keep the same amount of overbooking.ANS: BPROBLEM1. Consolidated Salt Company sells table salt to both retail grocery chains and commercial users(e.g., bakeries, snack food makers, etc.). The demand function for each of these markets is:Retail grocery chains P1 = 180 - 8Q1Commercial users P2 = 100 - 4Q2where P1 and P2 are the prices charged and Q1 and Q2 are the quantities sold in the respectivemarkets. Consolidated's total cost function (which includes a "normal" return to the owners) for salt is:TC = 50 + 20(Q1 + Q2)(a) Determine Consolidated' s total profit function.(b) Assuming that Consolidated is effectively able to Icharge different prices in the two markets, whatare Ithe profit-maximizing price and output levels for the product in the two markets? What isConsolidated' s total profit under this condition?(c) Assuming that Consolidated is required to charge the same price in each market, what are theprofit maximizing price and output levels? What is Consolidated' s total profit under this condition?ANS:

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(a) Determine Consolidated's total profit function.

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ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

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Question

21. (Advanced Material) If airlines found that the number of no-shows starts to increase, then its policy
for optimal overbooking would tend to:
a. make them reduce the amount of overbooking.
b. cause them to increase the amount of overbooking.
c. let them keep the same amount of overbooking.
ANS: B
PROBLEM
1. Consolidated Salt Company sells table salt to both retail grocery chains and commercial users
(e.g., bakeries, snack food makers, etc.). The demand function for each of these markets is:
Retail grocery chains P1 = 180 - 8Q1
Commercial users P2 = 100 - 4Q2
where P1 and P2 are the prices charged and Q1 and Q2 are the quantities sold in the respective
markets. Consolidated's total cost function (which includes a "normal" return to the owners) for salt is:
TC = 50 + 20(Q1 + Q2)
(a) Determine Consolidated' s total profit function.
(b) Assuming that Consolidated is effectively able to Icharge different prices in the two markets, what
are Ithe profit-maximizing price and output levels for the product in the two markets? What is
Consolidated' s total profit under this condition?
(c) Assuming that Consolidated is required to charge the same price in each market, what are the
profit maximizing price and output levels? What is Consolidated' s total profit under this condition?
ANS:

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