Essentials of Economics (MindTap Course List)
8th Edition
ISBN: 9781337091992
Author: N. Gregory Mankiw
Publisher: Cengage Learning
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Chapter 7, Problem 8PA
To determine
The
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Question 1: Microsoft sells two types of office software, a word processor it calls Word, and a spreadsheet it calls Excel. Both can be produced at zero marginal cost. There are two types of consumers for these products, who exist in roughly equal proportions in the population: authors, who are willing to pay $120 for Word and $40 for Excel, and economists, who are willing to pay $50 for Word and$150 for Excel.
a. Suppose that Microsoft execs decide to sell Word and Excel separately.
What price should Microsoft set for Word? (Hint: Is it better to sell only to authors, or to try to sell to both authors and economists?)What price should Microsoft set for Excel?What will Microsoft’s profit be from a representative group of one author and one economist?b. Suppose that Microsoft decides to bundle together Word and Excel in a package called Office, and not offer them individually.
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Ilsia is driving home from work. She needs to buy gas and notices an Exxon-Mobil station on one side of the street and a Shell station on the other side of the street. Although run by different companies, the two stations sell gasoline at the same price.
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Chapter 7 Solutions
Essentials of Economics (MindTap Course List)
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