As a manager of a chain of movie theaters that aremonopolies in their respective markets, you havenoticed much higher demand on weekends than duringthe week. You therefore conducted a study that hasrevealed two different demand curves at your movietheaters. On weekends, the inverse demand function isP = 35 -0.001Q; on weekdays, it is P = 25-0.002Q.You acquire legal rights from movie producers to showtheir films at a cost of $25,000 per movie, plus a $3.00"royalty" for each moviegoer entering your theaters (theaverage moviegoer in your market watches a movieonly once).What type of pricing strategy should you consider inthis case?multiple choiceBlock pricingFirst degree price discriminationThird degree price discriminationSecond degree price discriminationWhat price should you charge on weekends?Instructions: Enter your response rounded to twodecimal places.$What price should you charge on weekdays?Instructions: Enter your response rounded to twodecimal places.$

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Answered: As a manager of a chain of movie…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Joe has just moved to a small town with only one golf course, the Northlands Golf Club. His inverse demand function is p=200-2q, where q is the number of rounds of golf that he plays per year. The manager of the Northlands Club negotiates separately with each person who joins the club and can therefore charge individual prices. This manager has a good idea of what Joe's demand curve is and offers Joe a special deal, where Joe pays an annual membership fee and can play as many rounds as he wants at $20, which is the marginal cost his round imposes on the Club. What membership fee would maximize profit for the Club? The manager could have charged Joe a single price per round. How much extra profit does the Club earn by using two-part pricing? The profit-maximizing membership fee (F) is $. (Enter your response as a whole number.)
You are an executive for Super Computer, Inc. (SC), which rents out super computers. SC receives a fixed rental payment per time period in exchange for the right to unlimited computing at a rate of P cents per second. SC has two types of potential customers of equal number-10 businesses and 10 academic institutions. Each business customer has the demand function Q = 10 - P, where Q is in millions of seconds per month; each academic institution has the demand Q = 8-P. The marginal cost to SC of additional computing is 2 cents per second, regardless of volume. a. Suppose that you could separate business and academic customers. What rental fee and usage fee would you charge each group? What would be your profits? b. Suppose you were unable to keep the two types of customers separate and charged a zero rental fee. What usage fee would maximize your profits? What would be your profits? c. Suppose you set up one two-part tariff-that is, you set one rental and one usage fee that both business…
Suppose your firm owns a retirement development that is composed of a gated housing community and a championship level private golf course designed to appeal to retirees that are avid golfers. The development is somewhat isolated and there are no other golf courses within easy driving distance. Obviously, one of the main revenue sources for your company is golf course operations. Suppose the annual individual demand for avid golfers is represented by the following inverse demand function (Q is in annual rounds played): P=100-1.250 Most of the cost to maintain the golf course is fixed in the sense that it is not related to the number of rounds played. Your firm has estimated that the variable cost per round is the result of the cost of leasing and maintaining golf carts and is $20 per round. That is, the variable cost function is: VC (Q) = 200 a. If your firm decides to charge a single price per round of golf, what price should it charge and how many rounds of golf can you expect an…
Joe has just moved to a small town with only one golf course, the Northlands Golf Club. His inverse demand function is p = 140-2q, where q is the number of rounds of golf that he plays per year. The manager of the Northlands Club negotiates separately with each person who joins the club and can therefore charge individual prices. This manager has a good idea of what Joe's demand curve is and offers Joe a special deal, where Joe pays an annual membership fee and can play as many rounds as he wants at $40, which is the marginal cost his round imposes on the Club. Joe marries Susan, who is also an enthusiastic golfer. Susan wants to join the Northlands Club. The manager believes that Susan's inverse demand curve is p = 120-2q. The manager has a policy of offering each member of a married couple the same two-part prices, so he offers them both a new deal. What two-part pricing deal maximizes the club's profit? Will this new pricing have a higher or lower access fee than in Joe's original…
Three electricity generating firms are competing in the market with the inverse demand given by P(Q) = 20 - Q. All %3D firms have constant marginal costs. Firm 1's marginal cost is MC = 5; it has a capacity constraint of K1 = 5 units. Firm 2's marginal cost is MC = 8; it has a capacity constraint of K2 = 2.5 units. Firm 3's marginal cost is MC = 10; it %3D has a capacity constraint of K3 = 2.5 units. A. The three firms compete in the style of Cournot. Please compute the Nash equilibrium quantities. Also compute the price in the Nash equilibrium. B. Which of these firms would have produced a larger quantity if it had a larger capacity? Please explain.
As the manager of Smith Construction, you need to make a decision on the number of homes to build in a new residential area where you are the only builder. Unfortunately, you must build the homes before you learn how strong demand is for homes in this large neighborhood. There is a 60 percent chance of low demand and a 40 percent chance of high demand. The corresponding (inverse) demand functions for these two scenarios are P = 400,000 −400Q and P = 900,000 −250Q, respectively. Your cost function is C(Q) = 125,000 + 430,000Q. How many new homes should you build, and what profits can you expect? Number of homes you should build: homes Profits you can expect: $
Joe has just moved to a small town with only one golf course, the Northlands Golf Club. His inverse demand function is p=140-2q, where q is the number of rounds of golf that he plays per year. The manager of the Northlands Club negotiates separately with each person who joins the club and can therefore charge individual prices. This manager has a good idea of what Joe's demand curve is and offers Joe a special deal, where Joe pays an annual membership fee and can play as many rounds as he wants at $20, which is the marginal cost his round imposes on the Club. Joe marries Susan, who is also an enthusiastic golfer. Susan wants to join the Northlands Club. The manager believes that Susan's inverse demand curve is p=120-2q. The manager has a policy of offering each member of a married couple the same two-part prices, so he offers them both a new deal. What two-part pricing deal maximizes the club's profit? Will this new pricing have a higher or lower access fee than in Joe's original deal?…
Demand Factor Initial Value Average American household income $40,000 per year Round trip airfare from Los Angeles (LAX) to Las Vegas (LAS) $200 per round trip Room rate at the Lucky Hotel and Casino, which is near the Big Winner $200 per night Use the graph input tool to help you answer the following questions. You will not be graded on any changes you make to this graph. Note: Once you enter a value in a white field, the graph and any corresponding amounts in each grey field will change accordingly. Graph Input Tool Market for Big Winner's Hotel Rooms 500 I Price (Dollars per room) 450 200 400 Quantity Demanded (Hotel rooms per night) 300 350 300 250 Demand Factors 200 150 Average Income (Thousands of dollars) Demand 40 100 50 Airfare from LAX to LAS (Dollars per round trip) 200 0 50 100 150 200 250 300 350 400 450 500 QUANTITY (Hotel rooms) Room Rate at Lucky (Dollars per night) 200 PRICE (Dollars per room)
Q4-11: Suppose we have a monopolist supplying two different markets. The demand in these markets is given by two types of consumers, each buying exactly one unit of the product a monopolist is selling so long as their consumer surplus is non-negative. If the consumer has a choice, she or he will buy the product that gives them the highest consumer surplus. the monopolist has estimated the indirect utility (CS) of each type of consumer as V₁ = 7z₁ - P₁ V₂ = 222 - P2 == where = {1,2} is the quality chosen by the monopolist i.e. vertical differentiation. The monopolist does not know each consumer's type. There are 397 type one consumers and 107 type two consumers. Finally suppose the marginal cost for all quantities is given by e(z) = 2. Q4-1: What are the lowest qualities type 1 and 2 consumers will demand. Q4- 3: What are the incentive compatibility constraints for type 1 and 2 Q4-4: The monopolist has three options: ■Sell only to high type consumers ■ Sell to both consumers the same…
A firm sells its product to two groups of buyers: daytime buyers and nighttime buyers. There are 50 daytime buyers, all of whom have identical demands given by DD in the figure. There are 50 nighttime buyers, all of whom have identical demands given by DN in the figure. The firm's variable costs are constant (SMC = AVC = $12) and its total fixed cost is $250,000. The marketing director must devise a two-part pricing plan that will maximize the firm's profit. Price and cost ($ per unit) 100 12 0 Do: PD 100 -0.5Q, Multiple Choice Quantity Panel A - One Daytime buyer's demand A* = $1,472 A* = $2,178 A* = $3,872 SMC = AVC A* = $4,356 200 A* = $7,744 100 Assuming both daytime and nighttime markets are served, the optimal fixed access charge (4*) is 0 DN: PN 100 - QN SMC=AVC 100 Quantity Panel B - One Nighttime buyer's demand
Microsoft is the market leader in office software with its MSOffice. Its marginal cost of production c is 1 dollar per unit. Home users demand 40 million licenses and are willing to pay 50 dollars, whereas businesses demand 60 million licenses and are willing to pay 100 dollars. Microsoft also produces a home version of MS Office at a marginal cost of c'=2. Home users and businesses are willing to pay 60 and 40 dollars, respectively, for the home version. Which is the best pricing strategy for Microsoft? O Selling MSOffice Professional at 100 Selling MSOffice Home at 40 Selling MSOffice Professional units at 100 and MSOffice Home units at 40 Selling MSOffice Professional at 80 dollars and MSOffice Home at 40 dollars
As a manager of a chain of movie theaters that are monopolies in their respective markets, you have noticed much higher demand on weekends than during the week. You therefore conducted a study that has revealed two different demand curves at your movie theaters. On weekends, the inverse demand function is P= 200.001Q; on weekdays, it is P= 15 -0.002Q. You acquire legal rights from movie producers to show their films at a cost of $25,000 per movie, plus a $2.50 "royalty" for each moviegoer entering your theaters (the average moviegoer in your market watches a movie only once). What type of pricing strategy should you consider in this case? First degree price discrimination O Block pricing O Second degree price discrimination O Third degree price discrimination What price should you charge on weekends? Instructions: Enter your response rounded to two decimal places. What price should you charge on weekdays? Instructions: Enter your response rounded to two decimal places.

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