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- Consider a midwestern college town with one coffee shop. Each cup of coffee costs the shop $1 to produce.Each customer is willing to buy one cup of coffee. There are 4000 students, each with a willingness to payof $2. There are 1000 professors, each with a willingness to pay of $4. There are 5000 townies, each with awillingness to pay of $3.(a) Suppose the shop is unable to distinguish between the three types of customers. Determine the profitmaximizing price for a cup of coffee, the quantity sold, and the profit made by the coffee shop.Hints: you will need to check three different potential prices. Make sure to take cost into account.(b) Suppose the shop is able to distinguish between the three types and charge them different prices. Determine the prices charged and the total profit made by the coffee shop.(c) Discuss whether you think it is reasonable that the coffee shop could reliably distinguish between thethree types and charge them accordingly. Is there any reason this would…2. What do we mean by "internalization" and how can we relate the concept of vertical integration with this term? What are the factors that lead the firms to engage in internalization and how is it different from theory of location?5
- Attempts AverageO 8. Is bundling profitable? Suppose that Sean is the owner of the only nonmotorized water sports rental shop on a small lake in New Hampshire. At Sean's shop, customers can rent a variety of items such as canoes, paddle boats, tubes, and windsurfers. Assume that the marginal cost of renting out any of these items is $2 per item. Moreover, there are only two types of customers-college students and retired people-and there are equal numbers of each type of customer. The following table shows the willingness to pay of both customer types for rowboats and tubes. Item Rowboats Willingness to Pay (Dollars) (Dollars) College Students Retired People 15 Tubes 3 25 5 If Sean rents out rowboats and tubes separately, the best he can do is to charge $ prices, his total profit is $ for a rowboat rental and $ for a tube rental. At these from a market consisting of one of each type of customer. Now, suppose that Sean will allow customers only to purchase a rental bundle for rowboats…Which of the following statements about the societal orientation is true? Oa Marketers try to deliver all benefits sought by cusiomers even if that results in a negative effect on the environment. Ob.Organizations have either a social or economic justification for their existence. Oc None of them Od The societal marketing concept is very different from the market concept. Oe Companies that protect the environment by using all-natural materials in their products are showing a societal marketing orientation.QUESTION 8 S1, S2, S3 and S4 are UIUC students who just graduated. They each have a poster of Dolly Parton that they are willing to sell. B1, 82, B3 and B4 are new students at UIUC and want to buy Dolly Parton postern for their rooms. The tables below give the minimum selling prices and maximum buying prices for each student. Minimum Selling Prices Maximum Buying Pricen X+$9 S1 $10 B1 S2 $11 B2 X+$14 S3 $20 B3 X+$16 S4 $25 B4 X+$26 If X is negative $5 (.e., Xu-$5), what is the market-clearing price? Note: Do not include the dollar sign,
- Suppose the LNG Inc. company wants to build three pipelines that would carry fuels under your city. The pipelines pose risks of groundwater contamination and explosion. For each pipeline the table below shows the marginal benefit to LNG Inc. and the marginal cost of expected damages to residents (in millions of dollars). Pipelines Total Profits for LNG Inc. Total Damage to Residents Marginal Benefit (added profits) Marginal Cost (added damages) 0 0 0 0 0 1 120 55 120 55 2 200 130 80 75 3 270 255 70 125 Suppose that LNG Inc. is entitled under the injunctive remedy. The range of offers (in millions of dollars) that the residents mights make and LNG Inc. might accept to eliminate the third pipeline is between (minimally) ______ and (maximally) _________. Please fill the blanks.Give only typing answer with explanation and conclusion Suppose there are two industries with MAC functions as follows: MACA = 240-3EA and MACB=160-2EB And suppose the local government wished to reduce the total industry emissions by 50% (from the uncontrolled level) by implementing a uniform standard. How much emission would be reduced and what would be the total abatement costs for each industry under this uniform standard?E2
- 5. Individual Problems 14-2 A local Pilates studio recently began offering a monthly subscription service for its patrons. Suppose a particular patron at this studio has the following willingness-to-pay schedule, per session. Session Willingness to Pay 1st $70 2nd $60 3rd $50 4th $40 5th 6th $30 $20 Suppose this consumer would not demand any more sessions, even for free. Also assume that the marginal cost to the studio, per session, is constant at $10. At a price of $65.00 per session, the number of sessions demanded by this consumer would be is $ and producer surplus is $ At this price and quantity, consumer surplus Suppose the studio has devised a new pricing scheme for consumers who demand more than 1 session. This pricing scheme is a subscription service, whereby consumers can pay a flat fee of $216.00 and can have up to 6 sessions total. Using this subscription pricing model, this consumer would demand sessions. Under this scenario, consumer surplus is $ and producer surplus is $…1. A machine manufacturer sells high precision milling equipments. It sells the machine as well as the maintenance services. Users of milling machines from competitors were also potential sources of maintenance business. Based on a survey, customers were clustered into four segments of different size as shown below. Their willingness to pay for the machine and the maintenance service is also given in the table. The marginal cost to the firm for the machine and the maintenance services is respectively, $550 and $470, and there is no cost saving from bundling. segment Segment Size WTP for Machine WTP for maintenance 1 12 $1,250 $990 2 23 $1,450 $480 3 22 $1,180 $1,040 4 43 $1,390 $870 a. If the company uses component pricing, what are the optimal prices and the resulting profits for each item? b. If the company uses pure bundling, what are the optimal price and the resulting profit for the bundle? Between pure bundling and component pricing, which one is better for the company? Why? c.…M10
