An amusement park decides to apply two-part tariff rule to set price, given the demand equation P-6-2.5Q and MC =$1. Based on equilibrium price (P) and quantity (Q), how much is the maximum upfront fee the park could charge each visitor? (please review notes on 'Consumer value (refer to slides 1, 2, and 3)) O $0.75. O $1.0. O$1.25. O$1.5.
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- . UT Sports, a store that sells various types of sports clothing and other sports items, is planning to introduce a new design of World Cup Kits. A consultant has estimated the demand curve to be Q= 8400 – 420 P Where Q is cap sales and P is price. How many KITs could UT sell at $25.2 each? How much would the price have to be to sell 7,560 KITs? Suppose UT were to use the KITs as a promotion. How many KITs could UT give away free? At what price would no KITs be sold? Calculate the point price elasticity of demand at a price of $ 25.2.2. A market analysis employed by the "Sad Student Company" reveals that the number of lots of the game named "Handsome Killer: Revenge of the Teacher" ordered by the wholesalers when the game is offered at a price of dollars per lot is given by the formula: p=1500 – 2.5q a) Find the company's total, marginal and average revenues b) Find the price and quantity maximizing the total revenue by first expressing the revenue as a function of price rather than of quantityThe market supply and demand curve for Tesla Model S electric cars is given in the figure below. The equilibrium price and quantity for this market are given by P and Q* respectively. Price P* arts 929ds to bem bon Q* S Quantity 1. Subsequently, Porsche announces an all-electric sports car meant to rival the Tesla Model S. How would this affect the demand for Tesla Model S cars? Illustrate on the graph above. 926e1oni bratani yan 2. How will this change affect the equilibrium price and quantity (i.e. increase, decrease, or stay the same)? Illustrate the new equilibrium price and quantity on the graph above. Describe the market forces that move the price and quantity back into equilibrium after the change in demand f (27nlog A) Sounsven sd bloow terlw
- On the following graph, use the green point (triangle symbol) to plot the annual total revenue when the market price is $30, $45, $60, $75, $90, $105, and $120 per bike. 1280 1200 Total Revenue 1120 - 1040 980 880 800 720 640 560 o15 30 45 60 75 90 105 120 135 150 165 180 PRICE (Dollars per bike) According to the midpoint method, the price elasticity of demand between points A and B is approximately ▼ Suppose the price of bikes is currently $30 per bike, shown as point B on the initial graph. Because the demand between points A and B is a $15-per-bike increase in price will lead to in total revenue per day. In general, in order for a price decrease to cause a decrease in total revenue, demand must be TOTAL REVENUE (Dollars)An end-of-aisle price promotion changes the price elasticity of a good from -4 to -5. Suppose the normal price is $48, which equates marginal revenue with marginal cost at the initial elasticity of -4. What should the promotional price be when the elasticity changes to -5? (Hint: In other words, what price will equate marginal revenue and marginal cost?) O $27.00 O $45.00 O $36.00 O $31.5014. 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?
- A firm derives revenue from two sources: goods X and Y. Annual revenues from good X and Y are $10,000 and $20,000, respectively. If the price elasticity of demand for good X is -4.0 and the cross-price elasticity of demand between Y and X is 2.0, then a 2 percent decrease in the price of X will: decrease total revenues from X and Y by $200. O leave total revenues from X and Y unchanged. increase total revenues from X and Y by $520. decrease total revenues for X and Y by $600.Suppose that the market for air travel between Chicago and Dallas isserved by just airlines, United and American. An economist has studied thismarket and has estimated that the demand curves for round-trip tickets foreach airline are as follows:QdU = 10,000 - 100PU + 99PA (United’s demand)QdA = 10,000 - 100PA + 99PU (American’s demand) where PU is the pricecharged by United, and PA is the price charged by American.a. Suppose that both American and United charge a price of $300 each for around-trip ticket between Chicago and Dallas. What is the price elasticityof demand for United flights between Chicago and Dallas?b. What is the market-level price elasticity of demand for air travel betweenChicago and Dallas when both airlines charge a price of $300? (Hint:Because United and American are the only two airlines serving theChicago–Dallas market, what is the equation for the total demand for airtravel between Chicago and Dallas, assuming that the airlines charge thesame price?)Jackistheowneroftheonlylocalbarinasmalltown.Hesellswhiskeyin one-ounce glasses. For simplicity, let’s assume it doesn’t cost Jack anything to run his business. There are two customers, Adam and Burt who are twin brothers. Adam’s demand function is yA = 16 – 2p, and Burt’s demand function is yB = 8 – p (price is measured in dollars and quantity is measured by ounces). Jack knows their demand functions, but the problem is that he cannot tell them apart since they look exactly the same to him. To increase his profits, Jack offers the following two options that his customers can choose from: (1) You can pay $T1 up front and drink as much as you want; or (2) Pay $T2 up front and the price per ounce of whiskey will be $p. 1.a If p = 4, what is the maximal T2 that Jack can charge so that Burt is willing to come to the bar? 1.b What is the maximal T1 that Jack can charge so that Adam will choose the first pricing option?
- Attempts Keep the Highest / 4 6. Price-discriminating firm Eric owns a plot of land in the desert that isn't worth much. One day, a giant meteor falls on his property. The event attracts scientists and tourists, and Eric decides to sell nontransferable admission tickets to the meteor crater to both types of visitors: scientists (Market A) and tourists (Market B). The following graphs show demand (D) curves and marginal revenue (MR) curves for the two markets. Eric's marginal cost of providing admission tickets is zero. Market A Market B 10 10 8 2 2 MR A MR B PB 0 1 2 3 4 5 6 7 8 9 10 0 1 2 4 5 6 7 8 10 QUANTITY (Admission tickets per day) QUANTITY (Admission tickets per day) Suppose that at first, Eric charges the same price of $4 per admission in both markets so that the total number of admissions demanded is Suppose now that Eric decides to charge a different price in each market. To maximize revenue, Eric should charge $ per admission in Market A and $ per admission in Market B. At…6. You estimate that a typical consumer's inverse demand function is P = 200- 20Q and your cost function is C = 80Q. Determine the optimal two-part pricing strategy. How much will 4 consumers pay?7. A model of price discrimination Kevin owns a plot of land in the desert that isn't worth much. One day, a giant meteorite falls on his property, making a large crater. The event attracts scientists and tourists, and Kevin decides to sell nontransferable admission tickets to the meteor crater to both types of visitors: scientists (Market A) and tourists (Market B). The following graphs show daily demand (D) curves and marginal revenue (MR) curves for the two markets. Kevin's marginal cost of providing admission tickets is zero. Market A Market B 20 20 18 18 16 16 14 14 12 12 10 10 8 8 6 4 4 2 2 MR `A. A MR, B PB 1 2 3 4 5 6 7 8 10 1 2 3 4 5 6 7 8 9. 10 QUANTITY (Admission tickets) QUANTITY (Admission tickets) Suppose that at first, Kevin charges the same price of $8 per admission in both markets so that the total number of admissions demanded is tickets. PRICE (Dollars per ticket) co PRICE (Dollars per ticket)