In late 1991 two firms, Delta Airlines and the Trump Shuttle, provided air shuttle service between New York and Boston or Washington. The one-way pricecharged by both firms was $142 onshuttle mileage given to members of the Delta frequent-flier program from 1,000 to 2,000 miles, even though actual mileage from New York to either Bostonor Washington is about 200 miles. Moreover, Delta also offered an extra 1,000 miles to frequent fliers who made a round-tripday's total to 5,000 miles. Almost simultaneously, Trump changed the frequent-flier mileage it gave shuttle passengers. (It participated in the One Passfrequent-flier program with Continental Airlines and someweekdays and $92 on weekends, with lower off-peak advance purchase fares. In September 1991 Delta increased the per-tripon the same day, raising a possibleforeign carriers.) What sorts of changes do you think Trump made? Why?

Delta airlines and trump Shuttles both are competitors as they provide the same service that is Air…

Answered: In late 1991 two firms, Delta Airlines…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Amy is a graduate student living in Dallas who works as a caddy to supplement their normal income. At an hourly wage rate of $15, they are willing to caddy 5 hours per week. Upping the wage to $25 per hour, they are willing to caddy 14 hours per week. Using the midpoint method, the elasticity of Amy’s labor supply between the wages of $15 and $25 per hour is approximately (0.06, 0.53, 1.89, 10.56) , which means that Amy’s supply of labor over this wage range is (elastic/inelastic) .
Eric is a stay-at-home parent who lives in New York City and provides math tutoring for extra cash. At a wage of $50 per hour, he is willing to tutor 2 hours per week. At $75 per hour, he is willing to tutor 6 hours per week. Using the midpoint method, the elasticity of Eric’s labor supply between the wages of $50 and $75 per hour is approximately , which means that Eric’s supply of labor over this wage range is .
Suppose there are 800 regular Harry Potter fans and 200 fanatical Harry Potter fans wishing to attend the next theatre production of Hany Potter. The theatre has two classes of seating: ordinary seating and premium seating. The willingness-to-pay of each type of theatre-goer for the two classes of seating, as well as the marginal cost per customer for providing each class of seating, are summarized in the table below: Ordinary Seats Premium Seats $160 $100 Willingness-to-pay: Regular Hary Potter Fan Willingness-to-pay: Fanatical Harry Potter Fan Marginal cost per customer $40 $140 $300 $120 Suppose the concert organiser is considering selling the two dlasses of seats but cannot identify between regular and fanatical fans using observable characteristics. Which of the following is correct? a) The organiser should charge $100 per ticket for both ordinary and premium seats. b) The organiser should charge $160 per ticket for ordinary seats, and $300 per ticket for premium seats. c) The…
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?…
Edison is a stay-at-home parent who lives in Chicago and provides math tutoring for extra cash. At a wage of $35 per hour, he is willing to tutor 10 hours per week. At $60 per hour, he is willing to tutor 19 hours per week. Using the midpoints formula, the elasticity of Edison's labor supply between the wages of $35 and $60 per hour is approximately means that Edison's supply of labor within this wage range is which
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)
Q1. Suppose the government is considering an increase in the toll on a certain stretch of highway from $3 to $4. At present, 1 million cars per week use that highway stretch; after the toll is imposed, the number of cars per week will change according to its price elasticity of demand of -0.8 (this elasticity value is estimated based on the initial-value method). If the marginal cost of highway use is constant (i.e., the supply curve is horizontal) and equal to $3 per car, what is the net annual cost to society attributable to the increase in the toll? (your answer must be rounded off to the nearest million dollars per year, i.e., no decimal places; there are 52 weeks in a year)
The movie theater in Glendon has two types of customers: domestic students (group 1) and international students (group 2). At a price of p, cents, the number of movie tickets that domestic students are willing to buy per year is given by: q₁-170-0.7p₁. At a price of p₂ cents, the number of movie tickets that international students are willing to buy per year is given by: q₂-87-0.3p2. The total costs for the movie theater depend on the total number of tickets sold, 9₁+92, and are given by the following total cost function C(q₁+q₂)=(9₁ +9₂) ². Suppose that the movie theater can identify which students are domestic and which students are international, and students are unable to resell movie tickets to each other. This enables the theater to charge different prices to domestic vs international students. How do the cinema's profits change with this new pricing strategy? In other words, how much are the profits with uniform pricing, minus the profits with differentiated pricing?
Each consumer has the following demand for annual visits to Planet Fitness: Q = 200 - P (or P = 200 - Q), where Q is the number of visits to Planet Fitness per year and P is the price per visit. In western Maryland, Planet Fitness has a monopoly on the gym market in the area. If the marginal cost of serving each customer is $10 per visit, what is the optimal two-part tariff that Planet Fitness could charge each customer? Annual fee = $18,050; P = $0 for each visit. Annual fee = $20,000; P = $0 for each visit. Annual fee = $18,050; P = $10 for each visit. Annual fee = $20,000; P = $10 for each visit.
10.
Yearly demand for water by residents and businesses in the city of Black Bear Lake is equal to Qp= 2000-10P where Qp is millions of gallons of water, and P is price. Assume that, due to a drought, the state limits the city to no more than 1800 million gallons of water that it must allocate over a two-year period. The state currently does not charge Black Bear Lake for its water. If the City employs a 5 percent discount rate to determine the intertermporal allocation that maximizes net benefit, what price should it charge per million of gallons of water consumed during the first period, if it wants the market to solve this rationing problem? Please do not use a $ sign. Please round your answer to the nearest penny. Answer:
5. Price-discriminating monopolist Edison owns a plot of land in the desert that isn't worth much. One day, a giant meteorite falls on his property, making a large crater. The event attracts scientists and tourists, and Edison decides to sell nontransferable admission tickets to the meteor crater to both types of visitors: scientists (Market A) and tourists (Market B). The following graphs show daily demand (D) curves and marginal revenue (MR) curves for the two markets. Edison's marginal cost of providing admission tickets is zero. (? Market A Market B 20 20 18 18 16 16 14 14 Slope: -0.67 12 12 10 10 Slope: -0.67 8 8 4 4 2 2 MR, MRB PB( + 3 9 12 15 18 21 24 27 30 3 12 15 18 21 24 27 30 QUANTITY (Admission tickets) QUANTITY (Admission tickets) PRICE (Dollars per ticket) PRICE (Dolla per ticket)

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