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Questions 1-3 use the following case to determine a way to take a single product, like toilet and bundle it in such a way as to extract all of the profit at the time of the initial sale. You go to CostCo or Walmart and you see paper towel sold in a bundle and you wonder how the retailer can make any money. You do a little research and you find that the demand for paper towels is depicted by the following demand curve and marginal cost: P-$2.20 (1/10)*Q MR-$2.20 (2/10) Q МС 0.20 where P is the price of paper towels, MC is the marginal cost of paper towels, MR is the marginal revenue of paper towels and Q is the quantity of paper towels. So you decide to try two different pricing strategies: 1) sell one roll at a time and 2) use multi-part pricing to sell a bundle. For pricing strategy two, you determine that the quantity, price and profit are: Q 20, P $24.0, Profit $20 Q 10, P 1.20, Profit 10 Q 20, P $0.20, Profit 0 = Q 10, P $4.0, Profit $38 a. Q 10, P $4.0, Profit = $38 b. Q 10, P 1.20, Profit = 10 $24.0, Profit = $20 c. Q 20, P $0.20, Profit = 0 d. Q 20, P

Questions 1-3 use the following case to determine a way to take a single product, like toilet and bundle it in such a way as to extract all of the profit at the time of the initial sale. You go to CostCo or Walmart and you see paper towel sold in a bundle and you wonder how the retailer can make any money. You do a little research and you find that the demand for paper towels is depicted by the following demand curve and marginal cost: P-$2.20 (1/10)*Q MR-$2.20 (2/10) Q МС 0.20 where P is the price of paper towels, MC is the marginal cost of paper towels, MR is the marginal revenue of paper towels and Q is the quantity of paper towels. So you decide to try two different pricing strategies: 1) sell one roll at a time and 2) use multi-part pricing to sell a bundle. For pricing strategy two, you determine that the quantity, price and profit are: Q 20, P $24.0, Profit $20 Q 10, P 1.20, Profit 10 Q 20, P $0.20, Profit 0 = Q 10, P $4.0, Profit $38 a. Q 10, P $4.0, Profit = $38 b. Q 10, P 1.20, Profit = 10 $24.0, Profit = $20 c. Q 20, P $0.20, Profit = 0 d. Q 20, P

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Questions 1-3 use the following case to determine a way to take a single product, like toilet and bundle it in such a way as to extract all of the profit at the time of the initial sale. You go to CostCo or Walmart and you see paper towel sold in a bundle and you wonder how the retailer can make any money. You do a little research and you find that the demand for paper towels is depicted by the following demand curve and marginal cost: P-$2.20 (1/10)*Q MR-$2.20 (2/10) Q МС 0.20 where P is the price of paper towels, MC is the marginal cost of paper towels, MR is the marginal revenue of paper towels and Q is the quantity of paper towels. So you decide to try two different pricing strategies: 1) sell one roll at a time and 2) use multi-part pricing to sell a bundle. For pricing strategy two, you determine that the quantity, price and profit are: Q 20, P $24.0, Profit $20 Q 10, P 1.20, Profit 10 Q 20, P $0.20, Profit 0 = Q 10, P $4.0, Profit $38 a. Q 10, P $4.0, Profit = $38 b. Q 10, P 1.20, Profit = 10 $24.0, Profit = $20 c. Q 20, P $0.20, Profit = 0 d. Q 20, P
Transcribed Image Text:Questions 1-3 use the following case to determine a way to take a single product, like toilet and bundle it in such a way as to extract all of the profit at the time of the initial sale. You go to CostCo or Walmart and you see paper towel sold in a bundle and you wonder how the retailer can make any money. You do a little research and you find that the demand for paper towels is depicted by the following demand curve and marginal cost: P-$2.20 (1/10)*Q MR-$2.20 (2/10) Q МС 0.20 where P is the price of paper towels, MC is the marginal cost of paper towels, MR is the marginal revenue of paper towels and Q is the quantity of paper towels. So you decide to try two different pricing strategies: 1) sell one roll at a time and 2) use multi-part pricing to sell a bundle. For pricing strategy two, you determine that the quantity, price and profit are: Q 20, P $24.0, Profit $20 Q 10, P 1.20, Profit 10 Q 20, P $0.20, Profit 0 = Q 10, P $4.0, Profit $38 a. Q 10, P $4.0, Profit = $38 b. Q 10, P 1.20, Profit = 10 $24.0, Profit = $20 c. Q 20, P $0.20, Profit = 0 d. Q 20, P
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