2. Smile Bright toothpaste company has determined that the demand for its product depends on advertising expenditures A (in thousands of dollars) and the price charged P (in dollars) according to Q = 32A12- 64P, where Q is the umber of tubes of toothpaste sold. The company's marginal costs of production are constant and equal to 50 cents per tube. A. What levels of output, advertising expenditures, and price will maximize the firm's profits? B. Verify at the solution you have found in part A that the marginal revenue from advertising equals the price elasticity of demand.
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- MIcro: The company “Mike Broonie” operates in the market of monopolistic competition. Just now, the company weekly produces and sells 100 units of pillows for £12 each. The average total cost to produce the pillows doesn’t depend on the output, being £10 per unit. Having evaluated the price elasticity of demand for its product, the company concluded that demand is inelastic at the moment. a. What indicator characterizes the price elasticity of demand? What formula (or formulas) one can use to calculate this indicator? Choose any number for this indicator that, under the conditions specified in the case, could characterize the price elasticity of demand for the company “Mike Broonie”. b. Imagine that the owner of the company wants to increase the price of the company’s product. How will it affect sales, revenue, and profit (will each of these indicators increase, decrease, or remain the same)? Give here theoretically substantiated forecast. To increase the number of points…1) You run a small company that provides regular pool service to customers in East Dallas. Like your competitors in the pool service business, you provide pool service 4 times per month but invoice customers for service on a monthly basis. When you raised the monthly price of pool service from $125 to $140, you lost 28 customers, leaving you with 90 pools to service. You believe that your demand curve has constant elasticity and has not shifted since you started your business. a. Estimate your elasticity of demand? b. Given the cost of pool chemicals, gas, wear and tear on your truck and your time, you believe that the marginal cost of servicing an additional pool in East Dallas is $75 per month. What can you say about your optimal price? Was it a good idea to increase your price? Over time, you realize that half of your 90 customers appear to be more price sensitive than the other half. You know that your customers communicate with each other and would be unhappy knowing that they are…4. The elasticity of demand for a firm's product is -5 and its advertising elasticity of demand is 0.26. Determine the firm's optimal advertising-to-sales ratio. If the firm's revenues are 500,000, what is its profit-maximizing level of advertising?
- Explain the methods used toallocate the integratedmarketing communications(IMC) budget.6. Guy Rope and his backing group, the Tent Pegs, have just finished recording their latest music CD. Their record company's marketing department determines that the demand for the CD is as follows: Price (€) Number of CDs €24 10 000 22 20 000 20 30 000 18 40 000 16 50 000 14 60 000 The company can produce the CD with no fixed cost and a variable cost of €0.15 per CD. a. Find total revenue for quantity equal to 10 000, 20 000 and so on. What is the marginal revenue for each 10 000 increase in the quantity sold? b. What quantity of CDs would maximize profit? What would the price be? What would the profit be? c. If you were Guy Rope's agent, what recording fee would you advise Guy to demand from the record company? Why?14. The only DVD rental club available to you charges $4 per movie per day. If your demand curve for movie rentals is given by P = 20 – 2Q, where P is the rental price ($/day) and Q is the quantity demanded (movies per year), what is the annual maximum fee you would be willing to pay to join the club?
- Indicate which of the following graphs accurately reflects Crest's demand curve, marginal-revenue (MR) curve, average-total-cost (ATC) curve, and marginal-cost (MC) curve. Price, Cest Revenue Demand X TRO MR ΘΑ OB Quantity of Crest Toothpaste Demand B A ATC MR Quantity of Crest ToothpasteJoe Smiley buys his mobile phone services from Sprint, the sole provider in his state of Wyoming. Sprint offers the following pricing plans: a fee of 10 dollars per month and 50 minutes of free calls per monthor a fee of 20 dollars per month and 100 minutes of free calls. Under both plans the price of additional calls is 25 cents per minute. Joe Smiley's demand curve for mobile phone services is P=100 - 0.5Q where P is measured in cents/minute and Q is measured in minutes per month. Answer the following questions: a) suppose Joe Smiley subscribes to the first plan (10 dollar fee and 50 free minutes)(i) how much calling time would he consume? (ii) what would be his total benefit? What would be his surplus? b) suppose Joe Smiley subscribes to the second plan (20 dollar fee and 100 free…Refer to information in table 1. A cell phone company wants to devise pricing based on potential buyers' differences in preferences. Differences in preferences are shown by the group elasticities in column 2. Marginal cost (MC) of cell phone is $200. Working adults High income households Senior citizens Students $ S S Table 1: cell phone elasticities by consumer groups and marginal costs Consumer groups MC Price $ Working adults High income households Senior citizens Students If the base (undiscounted) price of the cell phone is $1000, based on the information in table 1 calculate the cell phone price for each group using mark-up pricing rule. Consumer groups Price Price elasticity of demand -1.25 -1.35 1,001.0 1000.0 400.7 771 -1.7 -2 $200 $200 $200 $200
- The following graph shows the daily demand curve for bippitybops in Detroit. Use the green rectangle (triangle symbols) to compute total revenue at various prices along the demand curve. Note: You will not be graded on any changes made to this graph. PRICE (Dollars per bippitybop) OTAL REVENUE (Dollars) 2400 1600 100 90 1200 80 1000 70 800 60 50 40 30 20 2200 + 10 2000 + 1800 + 0 1400 + Calculate the daily total revenue when the market price is $90, $80, $70, $60, $50, $40, $30, and $20 per bippitybop. Then, use the green point (triangle symbol) to plot the daily total revenue against quantity corresponding to these market prices on the following graph. (?) 0 ** B Demand 80 10 20 30 40 50 60 70 QUANTITY (Bippitybops per day) 90 100 Total Revenue A ? Total Revenue5. Consider a software company which has considerable market power over one of its products. The company sells its products online so the marginal cost is practically zero. (a) Show that the profit maximizing price-quantity combination is at the point on the demand curve that the price elasticity of demand is equal to 1. (b) Suppose that the inverse demand function is given by p = a - bq. Show that unitary elasticity is at the mid-point of the curve.Explain the type of pricing strategy that you as a manager of a company would implement for Good X and Good Y with the following price elasticity of demand co efficients. Use diagrams to motivate your answer. a) Good X: 2.3 b) Good Y: 0.6