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 3.5P
To determine
The ways in which the tip-pooling system would affect the productivity of the dealers.
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You make delicious cupcakes that you mail to customers across the country. Your cupcakes are so unique and special that you have a great deal of pricing power. Your customers have identical demand curves for your cupcakes, and a representative customer’s demand curve is shown below. (It’s not needed, but the demand curve equation is P=5-0.2Q or Q=25-5P.) Suppose your MC=$1/cupcake, whether you produce lots or just a few cupcakes. To keep things simple, suppose there are no fixed costs, so FC=0.a) Acting as a monopolist, show the standard pricing analysis on the graph below that identifies your profit-mamximing price and quantity for your representative customer. Shade areas representing your profit and CS. (PS and profit are the same here since FC=0).
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Joe has just moved to a small town with only one golf course, the Northlands Golf Club. His inverse demand function is
p = 140-2q,
where q is the number of rounds of golf that he plays per year. The manager of the Northlands Club negotiates separately with each person who joins the club and can therefore charge individual prices. This manager has a good idea of what Joe's demand curve is and offers Joe a
special deal, where Joe pays an annual membership fee and can play as many rounds as he wants at $40, which is the marginal cost his round imposes on the Club.
Joe marries Susan, who is also an enthusiastic golfer. Susan wants to join the Northlands Club. The manager believes that Susan's inverse demand curve is
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The manager has a policy of offering each member of a married couple the same two-part prices, so he offers them both a new deal. What two-part pricing deal maximizes the club's profit? Will this new pricing have a higher or lower access fee than in Joe's original…
Joe has just moved to a small town with only one golf course, the Northlands Golf Club. His inverse demand function is
p=140-2q,
where q is the number of rounds of golf that he plays per year. The manager of the Northlands Club negotiates
separately with each person who joins the club and can therefore charge individual prices. This manager has a good
idea of what Joe's demand curve is and offers Joe a special deal, where Joe pays an annual membership fee and can
play as many rounds as he wants at $20, which is the marginal cost his round imposes on the Club.
Joe marries Susan, who is also an enthusiastic golfer. Susan wants to join the Northlands Club. The manager believes
that Susan's inverse demand curve is
p=120-2q.
The manager has a policy of offering each member of a married couple the same two-part prices, so he offers them both
a new deal. What two-part pricing deal maximizes the club's profit? Will this new pricing have a higher or lower access
fee than in Joe's original deal?…
Chapter 17 Solutions
Principles of Economics (12th Edition)
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