You own a private parking lot near City University with a capacity of 600 cars. The demand for parking at this lot is estimated to be Q=1,000 - 2P, where Q is the number of customers with monthly parking passes and P is the monthly parking fee per car. Your fixed costs of operating the parking lot, such as the monthly lease paid to the landlord are £25,000 per month. In addition, your insurance company charges you £20 per car per

You are an executive for Super Computer, Inc. (SC), which rents out super computers. SC receives a fixed rental payment per time period in exchange for the right to unlimited computing at a rate of P cents per second. SC has two types of potential customers of equal number-10 businesses and 10 academic institutions. Each business customer has the demand function Q = 10 - P, where Q is in millions of seconds per month; each academic institution has the demand Q = 8-P. The marginal cost to SC of additional computing is 2 cents per second, regardless of volume. a. Suppose that you could separate business and academic customers. What rental fee and usage fee would you charge each group? What would be your profits? b. Suppose you were unable to keep the two types of customers separate and charged a zero rental fee. What usage fee would maximize your profits? What would be your profits? c. Suppose you set up one two-part tariff-that is, you set one rental and one usage fee that both business…

The Acmeville Metropolitan Bus Service currently charges $0.99 for an all-day ticket, and has an average of 472 riders a day. The bus company is not earning a profit, but according to their contract with the city, they cannot cut the number of buses on the road. They must therefore find a way to increase revenues. The bus company is considering increasing the ticket price to $1.1. The marketing department's studies indicate this price increase would reduce usage to 195 riders per day. Calculate the absolute value of the price elasticity of demand for bus tickets using the simple percentage change method. Round your answer to one decimal place. price elasticity of demand = Which of the statements is true?

Realizing that there is a great potential for increased tax revenue, government officials in Homeyville began discussing how they could align Airbnb rentals with hotel stays from a tax perspective. Fast-forward to 2018, at which time Homeyville has finally made tax arrangements with Airbnb to levy a $40-per-room tax on rentals. However, now the market conditions have changed. More hosts have now entered the Airbnb market, and awareness of this hotel alternative has increased demand. The following graph shows the demand and supply curves for Airbnb rentals in 2018. Use the green rectangle (triangle symbols) to illustrate the area representing the revenue raised by a $40-per-room tax. Then use the black point (cross symbol) to shade the area representing the deadweight loss generated by this tax. PRICE (Dollars per rental) 200 190 180 Demand 2018 Tax Wedge 170 + 160 150 140 130 120 110 100 0 + 40 80 120 160 200 240 280 RENTALS (Rooms per day) Supply 2018 320 360 400 Tax Revenue…

You are a pricing analyst for QuantCrunch Corporation, a company that sells a statistical software package. To date, you only have one client. A recent internal study reveals that this client’s inverse demand for your software is P=1500-5Q and that it would cost you $1,000 per unit to install and maintain software at this client’s site. What is the profit that results from two-part pricing?   (Hint: set the per-unit price for each unit of the software installed and maintained equal to marginal cost; and charge a fixed “licensing fee” that extracts all consumer surplus from the client)

The Acmeville Metropolitan Bus Service currently charges $0.99 for an all-day ticket and is used by an average of 623 riders a day. The bus company is not earning a profit, but according to their contract with the city, they cannot cut the number of buses on the road. They must, therefore, find a way to increase revenues The bus company is considering increasing the ticket price to $1.21. The marketing department's studies indicate this price increase would reduce usage to 473 riders per day. Calculate the price elasticity of demand using the midpoint method for bus tickets to determine if the bus company should increase price or decrease price to increase revenues. Enter your answer as an absolute value and round it to two places after the decimal price elasticity of demand: Determine if demand is elastic or inelastic and what this implies regarding how ticket prices affect revenue Demand is inelastic, so decreasing ticket prices will increase revenue Demand is inelastic, so…

Suppose the demand for Apples is given by QA = 100 -4 PA and the current market price is 11. What is the compensating variation associated with a loss of access to the apple market at the initial price of 117 Assume demand remains constant What is the compensating variation associated with the increase in price from 11 to 227 Assume demand remains constant.

Given that MR = P"(1 + 1/Ep) = p*((Ep+1)/Ep) where Ep is the price elasticity of demand, if marginal cost is constant at $20 over the range of current potential production and the price elasticity of demand = -2.0, then the profit maximizing price to charge is: $35 $45 $30 $40