Microeconomic Theory
12th Edition
ISBN: 9781337517942
Author: NICHOLSON
Publisher: Cengage
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Question
Chapter 14, Problem 14.13P
a)
To determine
To calculate:
b)
To determine
In case the question requires us to calculate the quantity, price, and profit while considering the shrouded charges.
c)
To determine
To calculate:
Consumer surplus using results from part b.
d)
To determine
The welfare and maximizing level of shrouding.
e)
To determine
The welfare maximizing subsidy and the distributional consequences of the same.
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GameZone, a video games store, is considering the best way to price two new games – a first-person shooter (FPS) and a racing game. There are four types of consumers that might buy the games with roughly equal numbers of each type, and their willingness to pay (WTP) for each game is detailed in the table below (assume that the willingness-to-pay for a second game of the same type is zero). How should Gamezone price the two games separately to maximise revenue? How should Gamezone price a bundle of both games to maximise revenue? Is there an alternative (involving bundling) that generates more revenue than either single prices or a bundle alone? Under what condition/s is bundling likely to increase profits for a firm?
Consumer Type
WTP for FPS game
WTP for racing game
A
$120
$70
B
$70
$120
C
$160
$10
D
$10
$160
Q2.
Your brother is considering two cell phone providers i.e. UFONE and MOBILINK.
UFONE charges Rs.520 (super card) per month for the service regardless of the number of phone
calls made. MOBILINK does not have a fixed service fee but instead charges Rs. 1 per minute for
calls. Your brother's monthly demand for minutes of calling is given by the equation
Q = 150 - 50P, where P is the price of a minute
a. With each service provider, what is the cost to your brother of an extra minute on the
phone?
b. In light of your answer to (a) part, how many minutes would your brother talk on the
phone with each service provider?
c. How much would he end up paying each provider every month?
Identify nine common pricing methods.
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