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 17, Problem 3.3P
To determine
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Because of the housing bubble, many houses are now selling for much less than their selling price just two to three years ago. There is evidence that homeowners with virtually identical houses tend to ask for more if they paid more for the house. What fallacy are they making?
Refer to the Front Page to answer three questions.
FRONT PAGE
March Madness Becomes Sadness
Ticket prices for the college basketball championships always skyrocket when the
68-team draw is announced. And they jump even further as the Final Four teams
emerge. The year 2020 was no different. The 700 floor seats that are sold to
students for $40 apiece were already reselling for as much as $4,670 in early
January. If the history of March Madness is a guide, those tickets could have sold
for more than $10,000 each once the Final Four teams were known. In 2020,
however, there wasn't a Final Four: Fear of the coronavirus convinced the NCAA
to cancel that year's tournament. The only madness was among those that
paid scalpers' prices for tickets that got only $40 refunds.
Source: Media reports, March 10-14, 2020.
Instructions: Enter your response as a whole number.
a. What was the initial student price of a ticket to the NCAA finals?
$
per ticket
b. In January 2020, there was (Click to select)…
Starting a gluten free and nut free restaurant has been a lifelong dream of Sydney Quintero, since he realized his dietary restrictions as a teenager. Now, that Sydney has
graduated with his business degree, he is pursuing his dream. He has researched geographic locations around his state and selected three different cities, Fort Alden,
Central City and Roseville, as possibilities for his flagship restaurant. The market for gluten/nut free products often changes due to health awareness, current trends and
general demographic changes in population. Sydney's marketing research has given him some estimates for the different locations as described in the decision table
below.
Alternatives
Fort Alden
Central City
Roseville
Answer
Decision Table
Strong Market
75,000
68,000
105,000
State of Nature
Fair Market
Step 1 of 2: Using the maximax strategy, where would Sydney decide to start his restaurant?
O Roseville
O Fort Alden
48,500
52,000
76,000
O Central City
Poor Market
25,000
27,000
30,000…
Chapter 17 Solutions
Principles of Economics (12th Edition)
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- Starting a gluten free and nut free restaurant has been a lifelong dream of Sydney Quintero, since he realized his dietary restrictions as a teenager. Now, that Sydney has graduated with his business degree, he is pursuing his dream. He has researched geographic locations around his state and selected three different cities, Fort Alden, Central City and Roseville, as possibilities for his flagship restaurant. The market for gluten/nut free products often changes due to health awareness, current trends and general demographic changes in population. Sydney's marketing research has given him some estimates for the different locations as described in the decision table below. Alternatives Fort Alden Central City Answer Roseville Decision Table Strong Market 75,000 68,000 105,000 Step 2 of 2: What would Sydney's anticipated payoff be for the maximax strategy? State of Nature Fair Market 48,500 52,000 76,000 Poor Market 25,000 27,000 30,000 Keypad Keyboard Shortcuts Tablesarrow_forwardStarting a gluten free and nut free restaurant has been a lifelong dream of Sydney Quintero, since he realized his dietary restrictions as a teenager. Now, that Sydney has graduated with his business degree, he is pursuing his dream. He has researched geographic locations around his state and selected three different cities, Fort Alden, Central City and Roseville, as possibilities for his flagship restaurant. The market for gluten/nut free products often changes due to health awareness, current trends and general demographic changes in population. Sydney’s marketing research has given him some estimates for the different locations as described in the decision table below.Decision Table State of Nature Alternatives Strong Market Fair Market Poor Market Fort Alden 75,00075,000 49,50049,500 35,00035,000 Central City 70,00070,000 54,00054,000 29,00029,000 Roseville 115,000115,000 80,00080,000 40,00040,000 Step 2 of 2 : What would Sydney’s anticipated payoff be…arrow_forwardHomework (Ch 05) On the following graph, use the green point (triangle symbol) to plot the weekly total revenue when the market price is $50, $75, $100, $125, $150, $175, and $200 per scooter. TOTAL REVENUE (Dollars) 7830 7290 6750 8210 5670 5130 4590 4050 3510 2970 0 25 50 75 100 125 150 175 200 225 250 275 300 325 PRICE (Dollars per scooter) Total Revenue gage Learning According to the midpoint method, the price elasticity of demand between points A and B is approximately Suppose the price of scooters is currently $25 per scooter, shown as point B on the initial graph. Because the demand between points A and B is a $25-per-scooter increase in price will lead to in total revenue per week. In general, in order for a price increase to cause a decrease in total revenue, demand must bearrow_forward
- The owner of Tommy's Technicians has found that his shop is losing money and he is in jeopardy of going out of business. Sales have remained constant for quite some time and now he is looking at ways to cut expenses to stay in business. Which of the following expenses is his best choice to try to immediately reduce and save him meaningful dollars so he can remain in business? (Hint: First consider which ones he has ultimate control over?) Rent expense Utilities expense Payroll expense Shop insurance expense Advertising expensearrow_forwardKenji sees a classified ad from Lucia offering a used digital camera for $30. On the opposite page, he sees a big color ad from a national electronics chain offering a new digital camera for $250. Kenji values a digital camera at $300 as long as it works, regardless of whether it is new or used.arrow_forward6. Exercise 4.6 An econometrician hired to analyse a local golf course has determined that there are two types of golfers, the regular and the occasional. The annual demand for games from regular players is given by QH = 24 - 0.3P, where P is the price of a round of golf. On the other hand, the annual demand for occasional items is given by Q° = 10 - 0.1P. The marginal cost and the average total cost per item are equal to €20. a) If you could distinguish between regular and casual players, what price would be set for each type? How many games would each type of player play? How much profit could the golf course generate? Represent graphically. b) As an alternative to the discrimination of third degree prices, those in charge consider a double tranche rate according to which the members can play as many games as they wish at a price of € 20 per game. How much profit will the golf course generate if it charges all players the same annual fee for becoming a member of the club? What if you…arrow_forward
- 5.arrow_forwardElvira College has an enrollment of 1,000 students and is located in a small Midwestern town named Johnsonville. Johnsonville has a total population of 2,500 people. The nearest town is 20 miles away. Most of the residents shop locally, but they travel about once a month to the larger city and pick up the large-ticket items. Johnsonville has one fairly good-size supply store named Jameson's Grocery. The only other place in town where you might buy supplies is at the gas station/convenience store located on the edge of town. What competitive situation is Jameson's Grocery experiencing?Competitive Situation:Explanation:arrow_forwardIt's the year 2023 and you are the manager at a local brew pub here in Fayetteville. You are one of many local breweries in town; therefore, your customers have many options of where to spend their beer money. You want to increase revenue and decide to raise the price of a pint of your craft beer. The table below shows the sales of beer from week 1 and sales in week 2 after you raised price. Table 1. Sales Data for Weeks 1 and 2 Week Week 1 Week 2 Price ($ per pint) $6.00 $8.00 Sales (Pints) 2,500 1,100 Using the information in the above table, what was the change in total revenue from week 1 to week 2 when you changed your price? (enter your answer without a dollar sign and indicate a decrease in revenue, if applicable, by including a negative (-) sign)arrow_forward
- II. Pick any two (2) personal care product brands available in the market and answer the following questions and briefly explain why for each: Does it solve a need or problem? Is it easy to use? Is it physically well designed? Does it do well with a minimum amount and effort? Is it tailored to your customers?arrow_forwardQ-How does profit motive affect innovation and economic productivity? (Pages 43 – 50). Profit Motive Leads to Innovation and Increased Productivity According to Bruno Leone (1986), “In order to build and maintain a profitable concern, a businessman’s products would have to be needed, well-made, and competitively priced . Moreover, he would be creating jobs and helping to expand the general economy” (18). Profit motive promotes efficiency and productivity in an economy. The investor is constantly seeking new ways to effectively and efficiently provide goods and services to consumer, because, Mises (1986) stated, “Profit and loss are entirely determined by the success or failure of the entrepreneur to adjust production to the demand of the consumers” (40). The behavior of the consumer makes profits and losses occur, and this can result in a change of ownership from those who are inefficient to the efficient ones. Webley (1967) stated, “The successful firms are those that respond to the…arrow_forwardPlease answer everything in the photo.arrow_forward
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