Principles of Economics (12th Edition)
12th Edition
ISBN: 9780134078779
Author: Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher: PEARSON
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Chapter 13, Problem 2.9P
To determine
Price and output decision in a
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A large company in the communication and publishing industry has quantified the relationship between the price of one of its products and the demand for this product as Price = 150 - 0.02 x Demand for an annual printing of this particular product. The fixed costs
per year (ie., per printing) = $46,000 and the variable cost per unit=$40. What is the maximum profit that can be achieved? What is the unit price at this point of optimal demand? Demand is not expected to be more than 3,000 units per year.
The maximum profit that can be achieved is $. (Round to the nearest dollar.)
The unit price at the point of optimal demand is $ per unit. (Round to the nearest cent.)
Enter your answer in each of the answer boxes.
A discount shoe store always runs a ’buy one, get one free (limit one free pair per customer)’ campaign. A customer asked a clerk, if he would sell her one pair for half price. The clerk answered, ”I’m sorry, I can’t do that.” but when the customer decided to leave the store, the clerk hastily offered, “However, I think I can give you a 40% discount on any pair in the store.” Assuming the consumer has $200 to spend on shoes (X) or all other goods (Y ), and that shoes cost $100 per pair:
a. Illustrate the consumer’s opportunity set with the ”buy one, get one free” deal and with a 50 percent discount.
b. Why was the 40 percent discount offered only after the consumer rejected the ”buy one, get one free” deal and started to leave the store?
c. Why was the clerk willing to offer a ”buy one, get one free” deal, but unwilling to sell a pair of shoes for half price?
The Vista TV Cable Co. currently has 100,000 subscribers who are each paying a
monthly rate of $40. A survey reveals that there will be 1000 more subscribers for
each $0.25 decrease in the rate. At what rate will maximum revenue be obtained, and
how many subscribers will there be at this rate?
Chapter 13 Solutions
Principles of Economics (12th Edition)
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