You sell wristwatches. Your marginal cost and average cost for watches is $30. The demand curve for your watchesamong adults over age 50 is Q = 91,453-100P. The demand curve for your watches among adults under age 50 isQ- 31,437-100P. Round to two decimal places for all calculations below.a. Calculate the profit maximizing price and quantity for each group. What is the price elasticity of demand foradults over 50? Under 50? Explain which is your low-valuation group, and whether these results make sense.b. Contrast the profit earned in part (a) with the profit you would have earned if you had not been able to pricediscriminate. Was the price discrimination plan worthwhile? Explain.c. What is the optimal markup price for watches in both segments? Explain the calculation for optimal markup, andwhat it means.

Answered: You sell wristwatches. Your marginal…

You sell wristwatches. Your marginal Cost anu among adults over age 50 is Q = 91,453-100P. The demand curve for your watches among adul d to two derimal places for all calculations below.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Related questions

Q: A company is considering extending creait to a new customer. If the customer is approved, credit…

A: In this question breakeven probability of default is applicable on first transaction only because…

Q: If the interest rate is 3.4% per annum, calculate the present value of (A) less the present value of…

A: The present value of two payment options helps compare the options and understand which one requires…

Q: Sam would like to use the PMT function in Excel to calculate the monthly payments on a car loan of…

A: There are two types of annuities, i.e., (i) annuity due and (ii) ordinary annuity. An annuity can be…

Q: This card has an introductory APR of 0%. Credit cards often do this to entice customers.…

A: Introductory APR of 0% means that the card holder can make purchases or transfer a balance without…

Q: Suppose you open a credit card account and charge $150 to the account on the first of each month to…

A: MonthStarting balanceNew PurchasesBalance+ PurchasesFinance chargeNew BalanceMinimum…

Q: The cash price of a washing machine is RO 495. Hilal pays RO 25 down and makes 20 payments of 26 RO…

A: The correct option is D. 10.63% Please see the next step for the solution

Q: ment? (Note: Be careful not to round any intermediate stops less than six decimal places)

A: Loans are paid by equal periodic monthly payments and these monthly payments carry the payment of…

Q: Your credit card company charges you 1.32 percent per month. What is the APR on your credit card?…

A: APR is the annual percentage rate that is charged on the credit cards.

Q: Suppose you have a credit card with a balance of $3295.89 that charges 19.85% APR on unpaid…

A: Credit cards are used very often now days and credit cards are used for short term credits.Balance…

Q: (USING EXCEL FUNCTION PLEASE) You wish to plan your Bahamas Islands vacation. You estimate that it…

A: Compound = Monthly = 12Future Value = fv = $15,000Monthly Payment = p = $637.66Time = t = 24Payment…

Q: Credit Card Fees and Financing Jarrod has narrowed his choice to two credit cards that may meet his…

A: Given, The APR of card A is 23%. The APR of card B is 13% and annual charge is $23. Balance to be…

Q: You are purchasing a home for $300,000 and have a 20% down payment. You are deciding between a…

A: Here, To Find: Part A. Amount paid for points on the closing of the loan =? Part B. Decision from…

Q: suppose that you decide to borrow $15,000 for a new car. you can select one of the following loans,…

A: a.Loan ALoan Amount (pv) = $15,000Interest Rate (rate) = 5.9%Time Period = 3 YearsNumber of Payments…

Q: The trade credit terms obtained from your suppliers (ABC Ltd) is 2/20 net 60. Determine the…

A: The cost of not giving up the trade discount can be calculated using the following formula,

Q: a. What effective annual interest rate does the firm earn when a customer does not take the…

A: Companies give discount to the customers for early payment and that is cost to the company and that…

Q: You want to buy a house and received the following loan quotes. What is the incremental cost of Loan…

A: The incremental borrowing cost represents the effective interest cost that will be paid on…

Q: You are interested in saving for a trip when you graduate in three years. You can save $75 each of…

A: The future value refers to the value of all future cash flows at the future date compounded with the…

Q: If you borrow $5000 at an APR of r (as a decimal) from a lending institution that compounds interest…

A: Interest rate is the proportion of amount loaned on which a lender charger as interest to the…

Q: You are buying a sofa. You will pay $360 today and make three consecutive annual payments of $460 in…

A: Solution: When an asset is bought by paying the money in instalments, the actual price is calculated…

Q: Your credit card company charges you 1.36 percent per month. What is the APR on your credit card?…

A: Monthly interest rate = 1.36%

Q: do we include the 15% vat in our T-accounts

A: A follow-up question.Vat is the tax amount which is required to be chargeable on the purchases and…

Q: Suppose Capital One is advertising a 60-month, 5.62% APR motorcycle loan. If you need to borrow…

A: Borrowed amount = $9,400APR = 5.62%Number of payments = 60

Q: Assume the credit terms offered to your firm by your suppliers are 2/15, net 30 . Calculate the cost…

A: Discount % = 2% Credit Period = 30 daysDiscount Period = 15 daysNumber of day in a year = 365

Q: Would you rather receive $500 today or $500 after one month? (In terms of TVM)

A: According to Time Value of Money, the value of money reduces with time. The amount we receive after…

Q: Suppose Capital One is advertising a 60-month, 5.42% APR motorcycle loan. If you need to borrow…

A: EMI or monthly mortgage payments are the fixed amount paid by the borrower to the lender that…

Q: Calculate the present value:

A: Present Value of Annuity: It represents the present worth of the future annuity stream of cash…

Q: Which credit card should he choose? his total anual expense for card A will be ? round to the…

A: Given:Card ACard BAPR22%22%Annual Fee ($)040Monthly balance ($)699699

Q: What is the total interest paid to the nearest cent if the car costs $36,915, your down payment is…

A: A credit score is a metric which shows the ability of a person or an organisation to repay its debt…

Q: Big Dom's Pawn Shop charges an interest rate of 25.5 percent per month on loans to its customers.…

A: Solution (A) APR is the interest rate per period times the number of periods in a year APR = 12…

Q: Your business currently only accepts cash-only transactions. You are considering making a change by…

A: Current policy Price per unit unit =13150 Cost per unit =10500 unit sales per month =2750 New…

Q: Recently, you made multiple large purchases on your credit card totaling $10,350. The interest rate…

A: Formulas:

Q: You buy furniture for 5400. You pay 300 down the remainder is financed in 36 100 monthly payments.…

A: Furniture price = 5400 Down payment = 300 Number of payment = nper = 36 Monthly payment = pmt = 100

Q: Paying off a Discover card. Assume that you have a balance of $3000 on your Discover credit card and…

A: Here, Balance of the card is $3000 APR is 21% Minimum Payment is 2%

Q: The current spot rate for USD/GBP is 1.058 - 1.086. If you were to buy £4,799,207 worth of dollars…

A: To calculate how much the dealer would make on your transactions, you need to consider the bid and…

Q: You want to buy a car and have negotiated a sale price of $50,000. You can get a loan from your…

A: Present value = pv = $50,000 Compound = monthly = 12 interest rate = r = 6 / 12 = 0.5% Time = t = 6…

Q: The cash price of a washing machine is RO 495. Hilal pays RO 25 down and makes 20 payments of 26 RO…

A: Given: Cash price = RO495 Down payment =RO 25 Number of payments = 20 Amount paid = RO26

Q: Live Forever Insurance Company is selling a perpetual annuity contract that pays $2,700 monthly. The…

A: An annuity is a financial product where you make regular payments, and in return, you receive a…

Q: The minimum gross monthly income is $14,644.28 Down payment is $20,495 Now that you know the…

A: To find the annual percentage of minimum gross monthly income that you could reasonably be expected…

Q: You owe $1,032.56 on a credit card with an 11.25% APR. The minimum due is $150.00. What is the…

A: Interest amount refers to the minimum cost to be charged over the investment made by the investors…

Q: You are shopping and see an item that is normally priced for $900 on sale for 45% off. However, you…

A: Given, Normal price of the item = $900, Discount on sale of item 45%, Sale price = normal price-45%…

Q: You want to buy a computer for $2,000. The interest rate is on the loan is 12%, and you have 18…

A: First we will calculate EMI, so that we know how much we are paying in each payment. Formula for…

Concept explainers

Pricing

Pricing is used as a term in finance and economics, pricing is the process of fixing a value for a product or a service. Pricing establishes a value for a product or service that the customer has to pay. A business can choose from different strategies while deciding to set prices.

Question

You sell wristwatches. Your marginal cost and average cost for watches is $30. The demand curve for your watches
among adults over age 50 is Q = 91,453-100P. The demand curve for your watches among adults under age 50 is
Q- 31,437-100P. Round to two decimal places for all calculations below.
a. Calculate the profit maximizing price and quantity for each group. What is the price elasticity of demand for
adults over 50? Under 50? Explain which is your low-valuation group, and whether these results make sense.
b. Contrast the profit earned in part (a) with the profit you would have earned if you had not been able to price
discriminate. Was the price discrimination plan worthwhile? Explain.
c. What is the optimal markup price for watches in both segments? Explain the calculation for optimal markup, and
what it means.

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Step by step

Solved in 2 steps with 6 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions

If a person has ATM fees each month of $22 for 8 years, what would be the total cost of those banking lees? Totalcost
A store will give you a 1.00% discount on the cost of your purchase if you pay cash today. Otherwise, you will be billed the full price with payment due in 1 month. What is the implicit borrowing rate being paid by customers who choose to defer payment for the month? Note: Do not round Intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Effective annual rate %
Finance
Suppose Capital One is advertising a 60-month, 5.14% APR motorcycle loan. If you need to borrow $7,400 to purchase your dream Harley-Davidson, what will be your monthly payment? (Note: Be careful not to round any intermediate steps less than six decimal places.) Your monthly payment will be $______ (Round to the nearest cent.)
Suppose Capital One is advertising a 60-month, 5.47% APR motorcycle loan. If you need to borrow $7,600 to purchase your dream Harley-Davidson, what will be your monthly payment? (Note: Be careful not to round any intermediate steps less than six decimal places.)
Assume that you have a balance of $5000 on your MasterCard and that you make no more charges. Assume that MasterCard charges 12% APR and thut each month you make only the minimum payment of 5% of the balance. Find a formula for the balance B after t monthly payments. ellook
An electronics retailer is offering a deferred payment plan. A customer can buy a laptop today for no money down, followed by 12 monthly payments of $145, with the first payment due in 1 year from date of purchase. If the retailer is building in a rate of return of 12% compounded monthly, what is the purchase price of the laptop that was financed?
You want to buy a new sports coupe for $75,100, and the finance office at the dealership has quoted you a loan with an APR of 7.5 percent for 72 months to buy the car. Requirement 1: What will your monthly payments be? (Enter rounded answer as directed, but do not use rounded numbers in intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).) Monthly payment Requirement 2: What is the effective annual rate on this loan? (Enter rounded answer as directed, but do not use rounded numbers in intermediate calculations. Enter your answer as a percent rounded to 2 decimal places (e.g., 32.16).) Effective annual rate 7.78
Write the final answer as a percentage with one decimal
You are considering the purchase of a house. The mortgage company is approving 15-year loans at 4.5%. Use the Present Value Excel Template to determine what amount you could borrow based upon a budget with estimated monthly house payments of S1,500? Enter as a positive number with two decimal places (i.e., to the penny) but without the dollar sign here:
Calculate the CAT (total annual cost) for option 1 and then find which option is better to ask for a loan and explain why is it better. 1. Personal Loan MNL Bank 2.25% simple monthly interest rate 2. Savings Bank CAT= 30% 3. XYZ Bank CAT= 28.30% 4. 123 Bank CAT= 26.64%
Suppose Capital One is advertising a 60 month, 5.58% APR motorcycle loan. If you need to borrow $8100 to purchase your dream Harley- Davidson, what will be your monthly payment? (Note: Be careful not to round any intermediate steps less than six decimal places.) I keep typing this into my Ti - nspire but it keeps giving me the incorrect answer and I do not know why. (8100*0.465)/ (1 - (1 + 0.465) ^ - 60)) which I know isn't nthe correct monthly payment...