Suppose that you are the marketing manager of Citruscity, the only producer of grapefruits in the imaginary economy of Blockburg. As a monopolist, Citruscity’s objective is to maximize its profit, so it is up to you to devise a way to increase profits through price discrimination. As a former economics student, you know that many firms successfully practice price discrimination by separating their market into two identifiable types of consumers—what economists call third-degree price discrimination. Examples of this include student discounts, senior citizen discounts, and ladies’ night discounts.After doing some research, you conclude that the demand for grapefruits varies greatly between consumers who clip coupons and those who do not. The following graphs show the overall daily demand and marginal revenue (MR) for a pound of grapefruits for each group of consumers and the marginal cost (MC) for producing a pound of grapefruits. Assume that fixed costs are equal to zero.Note: You will not be graded on any changes made to these graphs.**Graph Explanation: Coupon Clippers**- The graph is labeled "Coupon Clippers."- The x-axis represents the quantity of grapefruits (pounds per day).- The y-axis represents the price (dollars per pound of grapefruits).- The graph includes three primary lines: - **Demand (blue line):** Slopes downward from left to right, indicating that as price decreases, the quantity demanded increases. - **Marginal Revenue (MR) (green line):** Lies below the demand line, indicating that additional units are sold at a lower price, affecting the revenue gained from each additional unit. - **Marginal Cost (MC) (orange line):** A horizontal line indicating constant marginal cost per unit produced.- The intersection between the MR and MC lines indicates the profit-maximizing point. ## Graph Analysis: Non-Coupon Clippers### Graph DescriptionThe graph depicts the relationship between price and quantity for grapefruits, focusing on non-coupon clippers. The axes are labeled as follows:- **Horizontal Axis (X-axis):** Quantity (Pounds of grapefruits per day), ranging from 0 to 100.- **Vertical Axis (Y-axis):** Price (Dollars per pound of grapefruits), ranging from 0 to 5.00.Three key lines are represented on the graph:- **Demand Curve:** A downward-sloping blue line indicating the relationship between price and quantity demanded.- **Marginal Cost (MC):** A horizontal orange line representing the constant marginal cost across different quantities.- **Marginal Revenue (MR):** A green line showing the marginal revenue for each additional unit sold.### Profit MaximizationThe graph includes a marker labeled "Profit Max," indicating the profit-maximizing price and quantity where the MR and MC intersect.### Table and InstructionsBelow the graph, there is a table to be completed based on the price and quantity calculated from the graph:#### Table Columns:1. **Consumer Type**2. **Price (Dollars per pound of grapefruits)**3. **Quantity (Pounds of grapefruits)**#### Consumer Types:- Coupon Clippers- Non-Coupon Clippers### InstructionsBased on the calculated information from the graph, provide the suggested coupon value for grapefruits. Consider the following:- What the coupon value should be to optimize pricing.- The resulting overall profit for Citruscity per day if it utilizes this coupon strategy to price discriminate its customers.Note: Specific dollar amounts and quantities are to be determined using the graph intersection points and ungraded elements.

Demand curve is downward sloping and marginal revenue lies below the demand curve. Seller needs to lower the price in order to sell more.

Business

Economics

Suppose that you are the marketing manager of Citruscity, the only producer of grapefruits in the imaginary economy of Blockburg. As a monopolist, Citruscity's objective is to maximize its profit, so it is up to you devise a way to increase profits through price discrimination. As a former economics student, you know that many firms successfully practice price discrimination by separating their market into two identifiable types of consumers-what economists call third-degree price discrimination. Examples of this include student discounts, senior citizen discounts, and ladies' night discounts. After doing some research, you conclude that the demand for grapefruits varies greatly between consumers who clip coupons and those who do not. The following graphs show the overall dailly demand and marginal revenue (MR) for a pound of grapefruits for each group of consumers and the marginal cost (MC) for producing a pound of grapefruits. Assume that fixed costs are equal to zero. Note: You will not be graded on any changes made to these graphs. Coupon Clippers 5.00 4.50 Profit Max 4.00 3.50 Demand 3.00 2.50 2.00 1.50 MC 1.00 0.50 MR 10 20 30 40 50 60 70 20 90 100 PRICE (Dallars per pound of grapefruits)

Suppose that you are the marketing manager of Citruscity, the only producer of grapefruits in the imaginary economy of Blockburg. As a monopolist, Citruscity's objective is to maximize its profit, so it is up to you devise a way to increase profits through price discrimination. As a former economics student, you know that many firms successfully practice price discrimination by separating their market into two identifiable types of consumers-what economists call third-degree price discrimination. Examples of this include student discounts, senior citizen discounts, and ladies' night discounts. After doing some research, you conclude that the demand for grapefruits varies greatly between consumers who clip coupons and those who do not. The following graphs show the overall dailly demand and marginal revenue (MR) for a pound of grapefruits for each group of consumers and the marginal cost (MC) for producing a pound of grapefruits. Assume that fixed costs are equal to zero. Note: You will not be graded on any changes made to these graphs. Coupon Clippers 5.00 4.50 Profit Max 4.00 3.50 Demand 3.00 2.50 2.00 1.50 MC 1.00 0.50 MR 10 20 30 40 50 60 70 20 90 100 PRICE (Dallars per pound of grapefruits)

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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