3. Is bundling profitable? Suppose that Ana is the owner of the only nonmotorized water sports rental shop on a small lake in New Hampshire. At Ana's shop, customers can rent a variety of items such as canoes, paddle boats, tubes, and windsurfers. Assume that the marginal cost of renting out any of these items is $2 per item. Moreover, there are only two types of customers-college students and retired people-and there are equal numbers of each type of customer. The following table shows the willingness to pay of both customer types for rowboats and kayaks. Item Rowboats Kayaks Willingness to Pay (Dollars) College Students 15 3 (Dollars) Retired People 25 5 of Ana rents out rowboats and kayaks separately, the best she can do is to charge $25 for a rowboat rental and hese prices, her total profit is $30 from a market consisting of one of each type of customer. Given the valuations in the previous table, it valuations of both consumer types are $5 for a kayak rental. At Now, suppose that Ana will allow customers only to purchase a rental bundle for rowboats and kayaks, with no option of renting either item ndividually. In this case, the bundle price that maximizes her profit is $ , which yields a total profit of $ profitable for Ana to bundle her water sport equipment. This is due, in part, to the fact that the correlated.

Economics

5. Suppose that on a campus, girls' demand for an air freshener is P 10 - Q, and boys' demand is P = 10 - Q. The supply for the air freshener is P = 5+Q. (a) Suppose that the air freshener is a private good. Write down the combined demand of girls and boys for the air freshener. What would be the equilibrium quantity of air freshener traded? at what price? (b) Now suppose that the air freshener is a public good. Write down the combined demand of girls and boys for the air freshener. What would be the equilibrium quantity of air freshener traded? at what price?

The reservation prices (in dollars) of three classes of demanders (classes A, B, and C) for Ricky Parton's (a Latin country-western singer) compact disks are given in the table that follows: Class CD 1 CD 2 А 11 5 В С 10 It costs $4 to produce and distribute each compact disk. The company can sell each CD separately, can put them together as a boxed set (that is, as a pure bundle), or can sell them in a mixed bundling format (offer the CDs both separately and as a boxed set). Assume that each demander wants only one of each of the CDs at the reservation price (or at any lower price) and that there are an equal number of demanders in each class. For simplicity, assume that the only costs are those mentioned here a. What pricing method would you advise Ricky's company to use? b. How much better (profit-wise) is the best pricing method than the second most profitable pricing method?

7. Graphically depict how variable ticket pricing leads to sports teams charging different prices for different games? Explain and clearly label your graph.

D2 A. Drive-in cinema became very popular in the late 1950s and early 1960s, particularly after screening Rebel Without a Cause in 1955 with James Dean and Natalie Wood, the main young stars of the film as a couple. So, finding a good pricing for this new type of movie screening was an issue for the theatre owners. If the demand for this entertainment was more price-sensitive for couples than for single individuals, managers would be optimally better off if they could charge one admission fee for the driver of the car and an extra fee for passengers. True or false? Explain. B. Hewlett-Packard had a program in which a consumer could mail in a form together with the proof of purchase of an inkjet printer and receive a rebate of $10.00. why not just lower the price of the printer by $10.00?

1. Optimal choice of capital Eleanor makes sweaters in her home. Starting with just some knitting needles and yarn, she was able to knit 60 sweaters per year. Now some local stores have expressed interest in her designs and offered to buy her sweaters for $10 each. This makes it worthwhile for her to invest in some capital; in particular, she could produce many more sweaters if she invested in one or more looms, as shown in the following table. Assume that Eleanor's sweater business is a perfectly competitive firm. Complete the following table by calculating the marginal physical product (MPP) of each loom and the marginal revenue product (MRP) of each loom. Quantity of Input (Looms) Output (Sweaters per year) MPP of Each Loom (Sweaters) MRP of Each Loom (Dollars) 0 1 2 3 4 5 60 110 150 184 213 238 50 40 34 29 25 If the rental price of a loom is $270 per year, Eleanor should use 500 400 340 290 250 Suppose the demand for sweaters is very elastic, while the demand for cigarettes is very…

2. Imagine there are 2 hot dog vendors on a linear beach 100 yards long. Assume: Customers are evenly distributed along the beach, located at the endpoints and spaced 5 yards apart. Production costs are 0. ● Both vendors sell hot dogs for p dollars. The cost to consumers of travel is 2 cents per yard. a. What are the profit-maximizing equilibrium locations, if any, for the three vendors? If there is an equilibrium, what do aggregate travel costs equal? b. What are the socially optimal locations, if any, to minimize travel costs? If there is a social optimum, what do aggregate travel costs equal?

. Do you consider yourself a member of any brand communities (formal or informal)? If so, what effect do these groups have on your purchasing behavior?

What are the two major SOURCES of transaction costs?  (If these two things weren’t present, transaction costs would be very low.