IV. Slim City is a town resided by slim people, with no health club in town. LA Fatness has estimated that theannual demand for their Fatness Club in this town to be Q = 160 - P. Every Club member has a marginal cost of$40, and the annual fixed cost of the business is $500 (assume a linear cost function).1. LA Fatness starts the first Fatness Club in town. What is the optimum price and membership quantity?2. What is the profit of the business at the optimum solution?3- Observing the potential for profit, Twenty-Eight-Hours Club (T-E-H Club), a competitor of the LA Fatness,enters the market. T-E-H Club has the same marginal and fixed cost structure as of the LA Fatness and provides ahomogeneous service. is the optimum quantity for the T-E-H Club?4- What will be the price in market after T-E-H Club enters the market?Styles Pane5- Suppose LA Fatness and T-E-H Club continue non-cooperative profit-maximizing strategies in market. Find thereaction function of the LA Fatness and the T-E-H Clubs.

As per new guidelines of Bartleby, I am supposed to answer only 3 parts of the given question. For…

Answered: IV. Slim City is a town resided by slim…

Managerial Economics: A Problem Solving Approach

5th Edition

ISBN:9781337106665

Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Chapter14: Indirect Price Discrimination

Section: Chapter Questions

Problem 14.2IP

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