Kindly solve iv, v and vi iv. What will be the profit for AG Travel and Tour in thecase of (iii) above?v. If AG Travel and Tour wants to charge a package price,what is the highest price it can charge?vi. What profit will AG Travel and Tour make if it chargesthe package price found in (v) above?

Answered: iv. What will be the profit for AG…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Kindly solve iv, v and vi

iv. What will be the profit for AG Travel and Tour in the
case of (iii) above?
v. If AG Travel and Tour wants to charge a package price,
what is the highest price it can charge?
vi. What profit will AG Travel and Tour make if it charges
the package price found in (v) above?

Expert Solution

Step 1

Since AG Tours and Travels is not able to identify members of each group, n order to capture all the demand, it will charge the lowest of the maximum willingness to pay for each product of the 2 groups. For room and board, it will charge 1800 and for entertainment, it will charge 500.

(iv). In the above case profit of AG Tour and Travels from each group will be 1300

= 1800 + 500 - 1000

= 1300

Total profit = 1300 + 1300

Total profit = 2600

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