WEEK 5 PROBLEM SET Due week 5 and worth 200 points. You will submit your answers in a Blackboard assessment filling out charts and answering the essays/short answer questions. Note: There is not an option to upload your assignment, you must use the Blackboard assessment; however, you will be able to copy and paste your answers from a Word document. Problem 1: Using the Marginal Approach Suppose your company runs a shuttle business of a hotel to and from the local airport. The costs for different customer loads are: 1 customer: $30 2 customers: $32 3 customers: $35 4 customers: $38 5 customers: $42 6 customers: $48 7 customers: $57 8 customers: $68. 1. What are your marginal costs for each customer load level? (Chart) 2. If you are compensated $10 per ride, what customer load would you choose? (Essay) Problem 2: Elasticity and Pricing Suppose the number of firms you compete with has recently increased. You estimated that as a result of the increased competition, the demand elasticity has increased from –2 to –3, i.e., you face more elastic demand. You are currently charging $10 for your product. What is the price that you should charge, if demand elasticity is -3? (Essay) Problem 3: Price Discrimination An amusement park, whose customer set is made up of two markets, adults and children, has developed demand schedules as follows: Price ($) Quantity Adults Children 5 15 20 6 14 18 7 13 16 8 12 14 9 11 12 10 10 10 11 9 8 12 8 6 13 7 4 14 6 2 The marginal operating cost of each unit of quantity is $5. Because marginal cost is a constant, so is average variable cost. Ignore fixed costs. The owners of the amusement part want to maximize profits. Calculate the price, quantity, and profit if: 1. The amusement park charges a different price for adults. (Chart) 2. The amusement park charges a different price for children. (Chart) 3. The amusement park charges the same price in the two markets combined. (Chart) 4. Explain the difference in the profit realized under the two situations. (Essay) Problem 4: Bundling Time Warner could offer the History Channel (H) and Showtime (S) individually or as a bundle of both. Suppose the reservation prices of customers 1 and 2 (the highest prices they are willing to pay) are presented in the boxes below. The cost to Time Warner is $1 per customer for licensing fees. Preferences Showtime History Chanel Customer 1 9 2 Customer 2 3 8 1. Should Time Warner bundle or sell separately? (Essay) 2. Should Time Warner bundle if everyone likes Showtime more than the History Channel, i.e., preferences are positively correlated. (Essay) 3. Suppose Time Warner could sell Showtime for $9, and History channel for $8, while making Showtime-History bundle available for $13. Should it use mixed bundling. i.e., sells products both separately and as a bundle? (Essay)
Delivering a high-quality product at a reasonable price is not enough anymore.
That’s why we have developed 5 beneficial guarantees that will make your experience with our service enjoyable, easy, and safe.
You have to be 100% sure of the quality of your product to give a money-back guarantee. This describes us perfectly. Make sure that this guarantee is totally transparent.Read more
Each paper is composed from scratch, according to your instructions. It is then checked by our plagiarism-detection software. There is no gap where plagiarism could squeeze in.Read more
Thanks to our free revisions, there is no way for you to be unsatisfied. We will work on your paper until you are completely happy with the result.Read more
Your email is safe, as we store it according to international data protection rules. Your bank details are secure, as we use only reliable payment systems.Read more
By sending us your money, you buy the service we provide. Check out our terms and conditions if you prefer business talks to be laid out in official language.Read more