Consider two internet service providers: ISP West and ISP East, offering internet access to a small town in north Kansas. They both have some estimations of the price elasticity of the demand facing them: Estimated Price Elasticity for ISP West: -1.25 Estimated Price Elasticity for ISP East:-1.125 They also have some estimations of their marginal cost, as defined by the monthly

Consider two internet service providers: ISP West and ISP East, offering internet access to a small town in north Kansas. They both have some estimations of the price elasticity of the demand facing them: Estimated Price Elasticity for ISP West: -1.25 Estimated Price Elasticity for ISP East:-1.125 They also have some estimations of their marginal cost, as defined by the monthly

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter14: Pricing Techniques And Analysis

Section: Chapter Questions

Problem 1E

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Assuming you are the managing director of a firm that produces three goods: A, Band C. The price elasticity of demand for A is 1.2, for B it is 1.00 and for C it is 0.75.It is known that he firm is experiencing serious cash flow problems and you have toincrease total revenue as soon as possible. If you were in a position to set the pricesfor these goods, what would be your pricing strategy for each product
The Potomac Range Corporation manufactures a line of microwave ovens costing $500 each. Its sales have averaged about 6,000 units per month during the past year. In August, Potomacs closest competitor, Spring City Stove Works, cut its price for a closely competitive model from $600 to $450. Potomac noticed that its sales volume declined to 4,500 units per month after Spring City announced its price cut. What is the arc cross elasticity of demand between Potomacs oven and the competitive Spring City model? Would you say that these two firms are very dose competitors? What other factors could have influenced the observed relationship? If Potomac knows that the arc price elasticity of demand for its ovens is 3.0, what price would Potomac have to charge to sell the same number of units it did before the Spring City price cut?
Question 1. Which measure of elasticity would be appropriate to determine the responsiveness of thedemand for the new model if the price of a competitor’s model changes? Provide acalculation of its value Question 2. Knowing how the quantity purchased of the new model might change in relation to its priceis important to the manufacturer. Which measure of elasticity would be appropriate to fulfilthis requirement? Provide a calculation of its value. Question 3. The consultancy firm advises that an economic slump is looming in which the annual incomeof a typical purchaser is expected to fall. Given this information, the manufacturer would liketo measure how the quantity demanded of the new model might be affected by the annualincome of a typical purchaser. Which measure of elasticity would be appropriate to fulfil thisrequirement? Provide a calculation of its value. Question 4. Discuss your findings, paying particular attention to how the various measures of elasticityand their values can…
A firm has capacity limitations and charges 30USD for their service duringdaily peak times. If the market demand elasticity drops from -3 during peaktimes to -5 at off peak times, how much should the firm charge to earn themaximum profit during off peak times?
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Suppose Ford currently sells 250,000 Ford Mustangs annually. The unit cost of a Mustang, including the -delivery cost to a dealer, is $16,000. The current -Mustang price is $20,000, and the current elasticity of -demand for the Mustang is 21.5. a. Determine a profit-maximizing price for a -Mustang. Do this when the demand function is of the constant elasticity type. Do it when the -demand function is linear. b. Suppose Ford makes an average profit of $800 from -servicing a Mustang purchased from a Ford dealer. (This is an average over the lifetime of the car.) How do your answers to part a change?
Please see attachment and type out the correct answer ASAP with proper explanation of each option given. Will give you thumbs up only for the correct answer.answer within 40 50 minutes .thank you .
Suppose a monopoly market has a demand function in whichquantity demanded depends not only on market price (P) butalso on the amount of advertising the firm does (A, measuredin dollars). The specific form of this function isQ =(20 - P2) (1 + 0.1A - 0.01A2).The monopolistic firm’s cost function is given byC = 10Q + 15 + A.a. Suppose there is no advertising (A = 0). What outputwill the profit-maximizing firm choose? What market price will this yield? What will be the monopoly’sprofits?b. Now let the firm also choose its optimal level of advertising expenditure. In this situation, what output levelwill be chosen? What price will this yield? What will thelevel of advertising be? What are the firm’s profits in thiscase? Hint: This can be worked out most easily by assuming the monopoly chooses the profit-maximizing pricerather than quantity.
Assume that you are a loyal customer from Lanuit Coffee and you always buy Americano coffee from Lanuit Coffee with the price USD 10, but then you look the Toast n Bread store bundling package that consists of the various coffee brand: Happy Coffee with Toast n Bread package USD 20. Which one will you choose? Will you still buy coffee from Lanuit Coffee? And as a loyal customer, which one more elastic, Lanuit Coffee or Happy Coffee for you? If you as the management of Lanuit Coffee, what will you do to keep the loyal customer, and how about your opinion with the elasticity of demand in Lanuit Coffee products? Please explain your answer.
Gerald makes a new brand of shoes that has a unit cost of $75.95 per shoe and a price elasticity of 4.70. What is the contribution - maximizing price for Gerald's shoes? Selected Answer: 62.66 Correct Answer: 96.48 \pm 0.2 i did the formula you recommended, but doesnt eqal the 96.48 as indicated ascorrect asnwer
Sal’s Streaming Company streams TV shows to subscribers in the US and Canada. Demand is??? = 50 − (1⁄3)??? and ??? = 80 − (2/3)???where ?’s are in thousands of subscriptions per year and ?’s are the subscription prices per year.The cost of providing ? units of service is given by ?? = 1000 + 30?, where ? = ??? + ???.(a) What are the profit-maximizing prices and quantities for the US and Canadian markets?(b) As a consequence of a new VPN service that Facebook has developed, subscribers in Canadaare now able to get the US streams and vice versa, so Sal can charge only a single price. Whatis the profit-maximizing single price that he should charge?(c) In which situation is Sal better off? In terms of consumers’ surplus which situation do peoplein Canada prefer and which do people in the US prefer? Why?
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