FITnest is one of the few fitness centers serving the greater area. The gym has been open for 3 years. It charges a flat price of $25 per visit to its clients, and the firm’s current average cost of production is $10 per visit. (You may assume that average cost has the “traditional U-shape”.) a) The owners of the gym heard you are studying economics, and they want some advice on how they could possibly increase their profits through price discrimination, which is a concept they have heard of but do not know much about. Provide an explanation of what price discrimination is and give them an example of how they could use group pricing in their climbing gym business. Explain how group pricing works to increase their profit. b) Given the current situation in the market for fitness in the area, would you expect to see competitors enter or exit the market? Explain. c) Given the current market conditions, what would you predict to observe in the long run with respect to the demand for FITnest's gym, the price it can charge, and its profit margin? Illustrate and explain.
FITnest is one of the few fitness centers serving the greater area. The gym has been open for 3 years. It charges a flat
a) The owners of the gym heard you are studying economics, and they want some advice on how they could possibly increase their profits through
b) Given the current situation in the market for fitness in the area, would you expect to see competitors enter or exit the market? Explain.
c) Given the current market conditions, what would you predict to observe in the long run with respect to the demand for FITnest's gym, the price it can charge, and its profit margin? Illustrate and explain.
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