EBK INTERMEDIATE MICROECONOMICS AND ITS
12th Edition
ISBN: 9781305176386
Author: Snyder
Publisher: YUZU
expand_more
expand_more
format_list_bulleted
Question
Chapter 15, Problem 15.8P
a.
To determine
To describe: The buyers’ maximum willingness to pay.
b.
To determine
To calculate: The
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solutionStudents have asked these similar questions
Assume you have your car broken down just before the weekend. You value your weekend trip as much
as v and if you have to stay home you get the zero utility. There are two dealerships in your town. At
the beginning of the day they simultaneously choose a price for repair. Dealers know that when you come
to one of them and observe the price, you can always call to another dealer to make an inquiry about his
price. The call is costless. The other dealer, however, can be occupied for this day. Assume, this happens
with probability a which is a common knowledge (but the dealers do not know whether the other dealer is
occupied or not). Assume zero repair cost for the dealer and find a symmetric equilibrium of the game.
The Chicago Bears offer what are essentially two products: preseason and regular season football games. They
play 2 preseason and 8 regular season home games. Suppose that Fred is a serious football fan. He values the
preseason games at $140 each and the regular season games at $220 each. Joe is a more casual fan. He values
the preseason games at $170 each and the regular season games at $180 each. Suppose that Fred and Joe are
the only fans.
If the Bears sell the tickets separately, the price of a ticket to a preseason game will be $ 140
The price of a ticket to a regular season game will be $ 180
Total revenue that the Chicago Bears collect will be $ 3440
If the Bears bundle tickets for the two preseason and eight regular season games together, the price the team will
set for the bundle is S.
Total revenue that the Chicago Bears collect will be S
Should the Bears' managers sell the tickets separately or as a bundle?
O A. The Bears should sell the tickets separately because they earn…
GameZone, a video games store, is considering the best way to price two new games – a first-person shooter (FPS) and a racing game. There are four types of consumers that might buy the games with roughly equal numbers of each type, and their willingness to pay (WTP) for each game is detailed in the table below (assume that the willingness-to-pay for a second game of the same type is zero). How should Gamezone price the two games separately to maximise revenue? How should Gamezone price a bundle of both games to maximise revenue? Is there an alternative (involving bundling) that generates more revenue than either single prices or a bundle alone? Under what condition/s is bundling likely to increase profits for a firm?
Consumer Type
WTP for FPS game
WTP for racing game
A
$120
$70
B
$70
$120
C
$160
$10
D
$10
$160
Chapter 15 Solutions
EBK INTERMEDIATE MICROECONOMICS AND ITS
Ch. 15.2 - Prob. 1TTACh. 15.2 - Prob. 2TTACh. 15.2 - Prob. 1MQCh. 15.2 - Prob. 1.1MQCh. 15.2 - Prob. 2.1MQCh. 15.2 - Prob. 1.1TTACh. 15.2 - Prob. 2.1TTACh. 15.2 - Prob. 1.2TTACh. 15.2 - Prob. 2.2TTACh. 15.3 - Prob. 1MQ
Ch. 15.3 - Prob. 2MQCh. 15.4 - Prob. 1MQCh. 15.4 - Prob. 1.1MQCh. 15.4 - Prob. 2.1MQCh. 15.5 - Prob. 1TTACh. 15.5 - Prob. 2TTACh. 15.5 - Prob. 1MQCh. 15.5 - Prob. 2MQCh. 15 - Prob. 1RQCh. 15 - Prob. 2RQCh. 15 - Prob. 3RQCh. 15 - Prob. 4RQCh. 15 - Prob. 5RQCh. 15 - Prob. 6RQCh. 15 - Prob. 7RQCh. 15 - Prob. 8RQCh. 15 - Prob. 9RQCh. 15 - Prob. 10RQCh. 15 - Prob. 15.1PCh. 15 - Prob. 15.2PCh. 15 - Prob. 15.3PCh. 15 - Prob. 15.4PCh. 15 - Prob. 15.5PCh. 15 - Prob. 15.6PCh. 15 - Prob. 15.7PCh. 15 - Prob. 15.8PCh. 15 - Prob. 15.9PCh. 15 - Prob. 15.10P
Knowledge Booster
Similar questions
- Assume that you are in the business of providing medical insurance. You have analyzed the market carefully, and you know that at a price of $6,000 per year, you will sell 40,000 insurance policies per year. In addition, you know that at any price above $6,000, no one will buy your insurance policies because the government provides equal-quality policies to anyone who wants one at $6,000. You also know that for every $1,000 you lower your price, you will be able to sell an additional 10,000 policies. For example, at a price of $5,000, you can sell 50,000 policies; at a price of $4,000, you can sell 60,000 policies; and so on. a. Sketch the demand curve that your firm faces. b. Sketch the effective marginal revenue curve that your firm faces. c. If the marginal cost of providing a health insurance policy is $5,000, how many will you sell and what price will you charge? What if MC = +4,500arrow_forwardOn your way home from Super Groceries, your car breaks down. It is a hot summer day and you have nobody to call. With little time before the food spoils, you decide to prioritize what to carry on the walk home. You choose to take three items with you. Since you will need all five items today, you will replace the two abandoned items at the corner store near your house, Convenient Grocers. The table contains the prices you paid for each good at Super Groceries and the prices you will need to pay at Convenient Grocers to replace the goods. Which three items should you save? OOOOO vegetables fruits eggs ham milk Item milk eggs ham vegetables fruits Price at Super Groceries $3.75 $3.80 $2.95 $3.80 $2.50 Price at Convenient Grocers $4.25 $2.95 $5.25 $3.05 $3.80arrow_forwardSuppose the National Football League (NFL) wants to make Super Bowl tickets affordable for more football fans. The league therefore sets the price of a Super Bowl ticket below what is generally considered a fair market price. Suppose the price of a ticket for a regular seat at the Super Bowl is set at just $500. People who have tickets, however, can turn resell them online for $2,500 each, or more. If there are no transaction costs associated with online sales of Super Bowl tickets, the true cost to a fan of attending the Super Bowl is: O at least $2,500. O the monetary price paid to obtain the ticket. at most $500. $2,000 less than the opportunity cost of a ticket.arrow_forward
- Suppose the National Football League (NFL) wants to make Super Bowl tickets affordable for more football fans. The league therefore sets the price of a Super Bowl ticket below what is generally considered a fair market price. Suppose the price of a ticket for a regular seat at the Super Bowl is set at just $500. People who have tickets, however, can turn resell them online for $2,500 each, or more. If there are no transaction costs associated with online sales of Super Bowl tickets, the true cost to a fan of attending the Super Bowl is:arrow_forwardThe regular air fare between Boston and San Francisco is 419. An airline using planes on this route observes that they fly with an average of 236 passengers. Market research tells the airlines’ managers that each $7 fare reduction would attract, on average, 3 more passengers for each flight. How should they set the fare to maximize their revenue?arrow_forwardYou make delicious cupcakes that you mail to customers across the country. Your cupcakes are so unique and special that you have a great deal of pricing power. Your customers have identical demand curves for your cupcakes, and a representative customer’s demand curve is shown below. (It’s not needed, but the demand curve equation is P=5-0.2Q or Q=25-5P.) Suppose your MC=$1/cupcake, whether you produce lots or just a few cupcakes. To keep things simple, suppose there are no fixed costs, so FC=0.a) Acting as a monopolist, show the standard pricing analysis on the graph below that identifies your profit-mamximing price and quantity for your representative customer. Shade areas representing your profit and CS. (PS and profit are the same here since FC=0). b) (Suppose you offer a quantity discount: first 10 cupcakes at $3 each and any cupcakes over 10 are offered at a discounted price. What discount price will maximize your profit? Show this quantity discount arrangement on your graph…arrow_forward
- After graduating, you start work as a management consultant. You are paid $210 per hour. One morning before work, you decide to buy a new car. You know the exact model you want, and you know that in your area the price ranges from $39,000 to $41,000, with the average price you can expect to pay being $40,000. You can choose among hundreds of dealers, but you don't know which dealer will give you the best price. Time is literally money, since every hour you spend searching is an hour you don't get paid. Each visit to a dealer takes an hour. Your expected marginal benefit of another search is the difference between the current dealer's offer and the average price. The first dealer you go to asks $40,500 for the car. Should you accept the price or keep searching? (Keep in mind that each visit to a dealer takes an hour.) Keep searching. Accept the price. Suppose you kept searching, and the next dealer you go to asks $40,150. Do you think you should accept this price or keep searching? O…arrow_forwardFirm A is planning to rollout a new nationwide wireless telephone service next month. Its potential customers are either light users or regular users and these exist in equal proportion in the population. The firm must decide between offering a plan with 300 minutes, 600 minutes, or offering both plans. Each of these options costs the firm $10 to provide, and consumers’ willingness to pay is given below: (Image Attached) Each potential customer calculates the net payoff (benefit minus price) that he would get from each of the plans and buys the plan that gives the highest net payoff, so long as the payoff is nonnegative. Assume that if both plans give an equal, non-negative payoff the customer buys the 600 minute plan. a) What prices should the firm set if it wants to offer both plans, such that light users purchase the 300 minute plan and regular users purchase the 600 minute plan? b) How much higher is a regular user’s payoff under the scenario in part (a) above than if the firm…arrow_forwardElvira College has an enrollment of 1,000 students and is located in a small Midwestern town named Johnsonville. Johnsonville has a total population of 2,500 people. The nearest town is 20 miles away. Most of the residents shop locally, but they travel about once a month to the larger city and pick up the large-ticket items. Johnsonville has one fairly good-size supply store named Jameson's Grocery. The only other place in town where you might buy supplies is at the gas station/convenience store located on the edge of town. What competitive situation is Jameson's Grocery experiencing?Competitive Situation:Explanation:arrow_forward
- A distillery makes whisky, where its profits from production per bottle are given by T = p – y? where p is the price it charges per bottle and y is the number of years the bottle is aged. There are two types of whisky drinkers, connoisseurs (H type) and casuals (L type). H-type have utility UH (y, p) = 8y – p, while L-type have utility uz (y, p) = 2y – p. There are 10 consumers of each type, and each will buy at most one bottle. Each consumer's utility if she does not buy is 0. If a consumer is indifferent between buying two bottles, assume she will buy the more aged one (the one with higher y). If a consumer is indifferent between buying a bottle and not buying, assume she will buy. Bottles are characterised by (y, p), years of age and price. For each menu of offerings below, calculate the distillery's profit. (1, 9) and (4, 24) (1, 2) and (4, 24) (1, 2) and (2, 24) Calculate the firm's profits when it chooses the optimal menu.arrow_forwardWhen a company offers a new product or service, they estimate how much of that product or service people will want at different prices. This is referred to as the product or service demand. As the price of a product or service increases, the demand usually decreases, and this drives the price down. Companies use the estimated demand to determine how much of a product or service they are willing to supply at different prices. As the price of a product or service increases, companies are willing to supply more of it because they will earn more money. If you graph the demand and the supply curves on the same xy-plane, they will sometimes intersect at the point where the price and the supply are in equilibrium. Consider the scenario below. Yaseen is a local artist who wants to increase the amount of money she earns every month by selling at-home painting kits. These kits will include a photograph of the finished painting, a link and password to Yaseen’s YouTube channel where she will…arrow_forwardYour friend bought two tickets to see James Taylor play at the Save-On Center, but now her partner can’t make it. You knew about the concert, but you decided you’re not a big enough fan to pay $100 for a ticket. On the other hand, she would have bought tickets even if they cost $150 each. If you assume that she cannot sell the ticket anywhere else, what is the minimum price you can offer her for the ticket that she will accept? Explain your answer.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- Principles of Economics (12th Edition)EconomicsISBN:9780134078779Author:Karl E. Case, Ray C. Fair, Sharon E. OsterPublisher:PEARSONEngineering Economy (17th Edition)EconomicsISBN:9780134870069Author:William G. Sullivan, Elin M. Wicks, C. Patrick KoellingPublisher:PEARSON
- Principles of Economics (MindTap Course List)EconomicsISBN:9781305585126Author:N. Gregory MankiwPublisher:Cengage LearningManagerial Economics: A Problem Solving ApproachEconomicsISBN:9781337106665Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike ShorPublisher:Cengage LearningManagerial Economics & Business Strategy (Mcgraw-...EconomicsISBN:9781259290619Author:Michael Baye, Jeff PrincePublisher:McGraw-Hill Education
Principles of Economics (12th Edition)
Economics
ISBN:9780134078779
Author:Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:9780134870069
Author:William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:PEARSON
Principles of Economics (MindTap Course List)
Economics
ISBN:9781305585126
Author:N. Gregory Mankiw
Publisher:Cengage Learning
Managerial Economics: A Problem Solving Approach
Economics
ISBN:9781337106665
Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-...
Economics
ISBN:9781259290619
Author:Michael Baye, Jeff Prince
Publisher:McGraw-Hill Education