EBK PRINCIPLES OF MICROECONOMICS (SECON
2nd Edition
ISBN: 9780393616149
Author: Mateer
Publisher: W.W.NORTON+CO. (CC)
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Chapter 11, Problem 4QR
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Impact on output when perfect
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Price discrimination is one of the features of which type of the market economy?
Each consumer has the following demand for annual visits to Planet Fitness: Q = 200 - P (or P = 200 - Q), where Q is the number of visits to Planet Fitness per year and P is the price per visit. In western Maryland, Planet Fitness has a monopoly on the gym market in the area. If the marginal cost of serving each customer is $10 per visit, what is the optimal two-part tariff that Planet Fitness could charge each customer?
Annual fee = $18,050; P = $0 for each visit.
Annual fee = $20,000; P = $0 for each visit.
Annual fee = $18,050; P = $10 for each visit.
Annual fee = $20,000; P = $10 for each visit.
Each consumer has the following demand for annual visits to Planet Fitness: Q = 100 - P, where Q is the number of visits to Planet Fitness per year and P is the price per visit. In western Maryland, Planet Fitness has a monopoly on the gym market in the area. If the marginal cost of serving each customer is $10 per visit, what is the optimal two-part tariff that Planet Fitness could charge each customer?
Annual fee = $4,050; P = $10 for each visit
Annual fee = $5,000; P = $0 for each visit.
Annual fee = $4,050; P = $0 for each visit.
Annual fee = $5,000; P = $10 for each visit.
Chapter 11 Solutions
EBK PRINCIPLES OF MICROECONOMICS (SECON
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- Internet service in the local market is supplied by Laura's Internet Service. The demand function is: QD = 6,500 - 100P The marginal cost function is: MC(Q) = 6.67 + 0.0067Q If Laura practices first-degree price discrimination, what are consumer surplus and Laura's producer surplus in this market? Does Laura's market power and first-degree price discrimination result in reduced societal welfare? In your answer (i) define first degree price discrimination; (ii) calculate her consumer- and producer -surplus; and (iii) interpret the welfare impact.arrow_forwardSuppose that 2,000 people are interested in attending ElvisLand. Once a person arrives at ElvisLand, his or her demand for rides is given by x = max{ 5 – p, 0}, where p is the price per ride. There is a constant marginal cost of $2 for providing a ride at ElvisLand. If ElvisLand charges a profit-maximizing two-part tariff, with one price for admission to ElvisLand and another price per ride for those who get in. How much should it charge per ride and how much for admission? Correct answer is $2 per ride and $4.50 per admission, how does one solve this problem?arrow_forwardEach consumer has the following demand for annual visits to a park is: Q = 100 - P, where Q is the number of visits to the park per year and P is the price per visit. In Kentucky, this particular park has a monopoly on the park market in the area. If the marginal cost of serving each customer is $10 per visit, what is the optimal two-part tariff that this park could charge each customer? Answer OptionsAnnual Fee = $4050; P= $10 for each visit Annual Fee = $4050; P= $0 for each visit Annual Fee = $5000; P= $10 for each visitAnnual Fee = $5000; P= $0 for each visitarrow_forward
- Why is price discrimination economically efficient for society as a whole but disadvantageous for buyers?arrow_forwardThe organisers of a college basketball tournament estimate that the demand for tickets by adults is given by QAD = 2,750 – 50P and that the demand for tickets by students is given by Q ES = 7,750 – 200P. The total cost of organising the tournament is given by C = 10 + 0.01Q², with Q being the number of spectators. a) The directors of the organization of the championship consider that price discrimination can give them a bad image and, therefore, announce a single price for all attendees. Calculate the number of tickets that will allow them to maximise profits and the price of each ticket. Represent graphically. b) In the face of harsh criticism from student associations, the organisers are considering segmenting the market and setting different prices for adults and students. How many tickets will you sell in this case and at what prices? Represent graphically. c) What pricing strategy do you think the organisers will ultimately opt for?arrow_forwardAirlines primarily use ___ price discrimination.arrow_forward
- How may price discrimination increase the social welfare?arrow_forwardWrite notes on Price Discrimination and Price Forcasting.arrow_forwardA single price monopolist has a cost function of c(Q) = 10 + Q, where Q is output. It faces the following demand curve: Q°(p) = 0, if p > 24 and Q°(p) = 120/p, if p s 24. What is the profit-maximizing choice of output? The profit maximizing choice of output is = At this optimum level of output, calculate the consumer surplus. In addition, by drawing a graph, show the area representing the producer surplus (label it by PS) and the area representing the deadweight loss (label it by DWL). Calculate the values of producer surplus and deadweight loss.arrow_forward
- Suppose the firm has the following information on the willingness and ability of senior citizens to pay for the all-you- can-eat buffet. Market for All-You-Can-Eat c. How many meals will the restaurant sell to senior citizens if it charges the profit - maximizing price determined in part a? meals d. Suppose the firm has the ability to price discriminate. What is the profit-maximizing level of output and price? The firm should charge senior citizens $ and will sell meals. e. What is the profit generated from the sale of senior citizen meals? What will be the total profit for the firm, assuming the firm can price discriminate between average consumers and senior citizens? $ is the profit generated from senior citizens. is the total profit generated from all sales.arrow_forwardFollowing information shows that a firm offering a good at different prices to groups of consumers with different levels of willingness to pay. Inverse Demand for movies: P1 = 20 – 4Q1 Inverse Demand for students: P2 = 10 – Q2 MC = 4Q LKR /ticket (a) What price and quantity and maximizes profits if the firm charges each market? (b) Demonstrate that charging different prices for the two groups results in higher profits than charging the same price for everyone. (c) Graph the demand curves, the marginal revenue curves, the marginal cost curve and highlight the equilibrium.arrow_forwardEconomics Consider the following cost function faced by the monopolist: TC(q)= 2q2+20q+10. The demand faced by the monopolist is the following: p(q)=200-10q, where q denotes quantity and p denotes price. Find the price and quantity that maximizes profit of the monopolist. If the monopolist becomes a perfectly price discriminating monopolist, calculate the Consumer Surplus and Producer Surplus.arrow_forward
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