what is the optimal price maximize profits? to In the following demand and cost functions & is selling ponce od p Q is quantity in the Thousand P = 30-29 Tc = Q +5Q-30 #whit
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- Return to Figure 9.2. Suppose P0 is 10 and P1 is 11. Suppose a new firm with the same LRAC curve as the incumbent tries to bleak into the market by selling 4,000 units of output. Estimate from the graph what the new firms average cost of producing output would be. If the incumbent continues. to produce 6,000 units, how much output would the two films supply to the market? Estimate what would happen to the market price as a result of the supply of both the incumbent firm and the new entrant. Approximately how much profit would each firm earn? Figure 9.2 Economics of Scale and Natural MonoployWould you rather have efficiency or variety? That is, one opportunity cost of the variety of products we have is that each product costs more per unit than if there were only one kind of product of a given type, like shoes. Perhaps a better question is, What is the right amount of variety? Can there be too many varieties of shoes, for example?Why do many Carmex product prices end in 9?What type of pricing is this called? What shouldhappen to demand when this approach is used?
- 4. You have been hired as a consultant to estimate the demand for various brands ofcoffee in the market. You are provided with annual price data for two years by U.S.state and the quantities sold. You want to estimate a demand function for coffeeusing this data. What problems do you think you will encounter if you estimatedthe demand equation by OLS?The table below shows the reservation prices for passengers for American Airlines. Reservation Price Cost Tourist Business Economy 100 120 200 First 150 175 300 2) If American Airlines can identify exactly the type of customer (full information) then how should it charge for a Business traveler and what ticket should it sell him? O $300 for a First Class ticket O $200 for an Economy ticket O $175 for a First Class ticket KN$120 for an Economy ticket Won't scll Sny ncketAssuming you are the managing director of a firm that produces three goods: A, Band C. The price elasticity of demand for A is 1.2, for B it is 1.00 and for C it is 0.75.It is known that he firm is experiencing serious cash flow problems and you have toincrease total revenue as soon as possible. If you were in a position to set the pricesfor these goods, what would be your pricing strategy for each product
- 4. Elasticity and total revenue The following graph shows the daily demand curve for bippitybops in Denver. 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. 120 110 100 Total Revenue 90 B0 70 50 40 30 20 10 Demand 10 20 30 40 50 70 90 100 110 120 QUANTITY (Bippitybops) PRICE (Dollars per bippitybop)The Lulu Hypermarket sells 0,209 boxes of chicken per month at RO 4 per box. The own price elasticity for chicken is estimated to be O.45 If Lulu Hypernarket decreases the pripc of a box of chicken byS00 Baiza -8 Per (a) How many boxes of chicken will Lulu Hypermarket sell? (b) Lulu Hypermarket's revenue will change by how much? (c) Will the consume: be better off or worse off?3. Answer the following questions about the figure below: eliqu Price $20 $18 $16 $14 $12 $10 $8. $6 $4 $2 0 MR D 1 2 3 4 5 6 7 8 9 10 11 12 13 14 Quantity MC a. What is the profit-maximizing level of output? iliw tailogonom off 010 +115d0-(899 moitiba T wilmM) loods.P b. What price with the monopolist charge to maximize profits?
- Vik and Fleet produce trainers in the sports-shoe market. For one of their main productsthey have the following demand curves: Vik PV =175 - 1:2Qv, Fleet Pf = 125 - 0:8Qfwhere P is in Rs. and Q is in pairs per week. The firms are currently selling 80 and 75 pairsof their products per week respectively.a. What are the current price elasticities for the products?A firm has capacity limitations and charges 30USD for their service duringdaily peak times. If the market demand elasticity drops from -3 during peaktimes to -5 at off peak times, how much should the firm charge to earn themaximum profit during off peak times?he quantity demanded each month of Russo Espresso Makers is 250 when the unit price is $136. The quantity demanded ach month is 1000 when the unit price is $106. The suppliers will market 750 espresso makers when the unit price is $80 er higher. At a unit price of $100, they are willing to market 2250 units. Both the supply and demand equations are known o be linear. (a) Find the demand equation. -1 -x + 146 25 p = (b) Find the supply equation. 1 x+ 70 p = 75* (c) Find the equilibrium quantity and the equilibrium price. |× units
