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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Question
Chapter 7, Problem 1.6P
To determine
The profit of Apple.
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Students have asked these similar questions
Briefly explain how the total revenue for a profit-seeking firm is determined.
Questions 1-3 use the following case to determine a way to take a single product, like toilet and bundle it in such a way as to extract all of the profit at the time of the initial sale. You go to CostCo or
Walmart and you see paper towel sold in a bundle and you wonder how the retailer can make any money. You do a little research and you find that the demand for paper towels is depicted by the following
demand curve and marginal cost:
P=$2.20 (1/10)*Q
MR-$2.20 (2/10)*Q
MC 0.20
where P is the price of paper towels, MC is the marginal cost of paper towels, MR is the marginal revenue of paper towels and Q is the quantity of paper towels.
So you decide to try two different pricing strategies: 1) sell one roll at a time and 2) use multipart pricing to sell a bundle.
Given the results for the pricing strategies in problems 1 and 2, what is your pricing decision and why?
Del's and Rodney's are two plumbing services in a gentrifying area of South East
London. Within the area they service, the two firms operate as a duopoly and
together serve one hundred percent of the available local market. One of their key
lines of business is visiting customer's homes to install a new shower rail. A student
project has been investigating the local plumbing business and has estimated the
following information for Del's and Rodney's:
Total demand for new shower rails per week is given by
P = 200 - 4Q
Where Q is total market demand and can be divided between Del's (qd) and
Rodney's (qr) such that
Q = qd + qr
Assuming that the marginal cost of serving an extra customer is £40 for each, and
that marginal revenue for Del is given by
MRd
2008qd - 4qr
And marginal revenue for Rodney is given by
MRr
Then
2008qr - 4qd
8
CONTINUED
Chapter 7 Solutions
Principles of Economics (12th Edition)
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