Gen Combo Managerial Economics & Business Strategy; Connect Access Card
9th Edition
ISBN: 9781260044294
Author: Baye
Publisher: MCG
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Question
Chapter 8, Problem 4CACQ
(A)
To determine
(B)
To determine
Maximum profits achieved is to be explained.
(C)
To determine
Whether
(D)
To determine
Price quantity combination maximizes revenue is to be ascertained.
(E)
To determine
Maximum revenue is to be calculated.
(F)
To determine
Whether demand is elastic, inelastic or unit elastic at the revenue maximizing price quantity combination is to be explained.
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MC
The diagram shows a pharmaceutical firm's demand
curve and marginal cost curve for a new heart medication
for which the firm holds a 20-year patent on its
production.
Assume this pharmaceutical firm charges a single price
for its drug. At its profit-maximizing level of output, it will
generate a total profit represented by
OA. areas J+K.
B. areas F+I+H+G+J+K
OC. areas E+F+I+H+G.
D. - it is not possible to determine with the informatio
OE. the sum of areas A through K.
(...)
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P1
Price
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P2
E
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$26
0
The marketing department of
$24 20,000
Johnny Rockabilly's record company
$22
40,000
has determined that the demand for his
$20
60,000
latest CD is given in the table at right.
$18
80,000
$16
100,000
$14
120,000
The record company's costs consist of a $240,000 fixed cost of recording the CD, an $8 per CD variable cost of
producing and distributing the CD, plus the cost of paying Johnny for his creative talent. The company is
considering two plans for paying Johnny.
Plan 1: Johnny receives a zero fixed recording fee and a $4 per CD royalty for each CD that is sold.
Plan 2: Johnny receives a $400,000 fixed recording fee and zero royalty per CD sold.
Under either plan, the record company will choose the price of Johnny's CD so as to maximize its (the
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costs of production, distribution, and the payment made to Johnny.
Johnny's payment will be
be
under plan 2 as…
Which of the following is the best example of perfect price discrimination?
A. Universities give entry scholarships to poorer students.
B. Students pay lower prices at the local theatre.
○ C. A hotel charges for its rooms according to the number of days left before the check-in date.
○ D. People who collect the mail coupons get discounts at the local food store.
○ E. An airline offers a discount to students.
Chapter 8 Solutions
Gen Combo Managerial Economics & Business Strategy; Connect Access Card
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