Harry and Sally own a dog-walking service. Their service includes driving to their customer's homes; taking the customer's dog on a 10-minute walk; 5 minutes of attention/playtime in or just outside the customer's house; refilling water and/or food; waste removal during walk; and one treat per visit. They charge customers $15 per dog-walk. Variable costs total $8.50 per walk - $6.50 for labor/supplies plus $2.00 to reimburse fuel. Their average customer purchases 15 walks per month. Their average customer remains a customer for 7 months. H&S's fixed costs are a low $350 per month. The city Harry and Sally service has 45,000 dog owners, 32% of which have a subscription to "dogster magazine. H&S are considering running an ad in dogster, for a discounted dog-walk promotion where you can purchase your first walk for $5. The cost of running the ad is $1500. Harry and Sally originally charged $20 per dog-walk but decided to reduce the price to $15 shortly after they started their business. At $20 per dog-walk, they averaged 450 walks per month. After reducing their price to $15 per dog-walk, they averaged 780 walks per month. 1. What is the optimal price to maximize profit for H&S dog-walks? 100

Harry and Sally own a dog-walking service. Their service includes driving to their customer's homes; taking the customer's dog on a 10-minute walk; 5 minutes of attention/playtime in or just outside the customer's house; refilling water and/or food; waste removal during walk; and one treat per visit. They charge customers $15 per dog-walk. Variable costs total $8.50 per walk - $6.50 for labor/supplies plus $2.00 to reimburse fuel. Their average customer purchases 15 walks per month. Their average customer remains a customer for 7 months. H&S's fixed costs are a low $350 per month. The city Harry and Sally service has 45,000 dog owners, 32% of which have a subscription to "dogster magazine. H&S are considering running an ad in dogster, for a discounted dog-walk promotion where you can purchase your first walk for $5. The cost of running the ad is $1500. Harry and Sally originally charged $20 per dog-walk but decided to reduce the price to $15 shortly after they started their business. At $20 per dog-walk, they averaged 450 walks per month. After reducing their price to $15 per dog-walk, they averaged 780 walks per month. 1. What is the optimal price to maximize profit for H&S dog-walks? 100

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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