Suppose that at first, Edison charges the same price of $8 per admission in both markets so that the total number of admissions demanded is tickets. Suppose now that Edison decides to charge a different price in each market. To maximize revenue, Edison should charge $ Market A and $ per admission in Market B. At these prices, he will sell a total quantity of admission tickets per day. Complete the following table by calculating Edison's total revenue from selling in both markets under the nondiscriminatory as well as the discriminatory price policy. Pricing Policy Nondiscriminatory Discriminatory Total Revenue (Dollars) Edison charges a higher price in the market with a relatively per admission in price elasticity of demand.
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- Suppose there are two types of cable TV viewers. The first type places a high value on sports channels (e.g., ESPN, Fox Sports, and the Golf Channel) and a low value on all other channels. The second type places a high value on music channels (e.g., VH1, MTV3, and CMT) and a low value on all other channels. In this case, we would expect cable operators to: use fixed-cost pricing. use "à la carte" pricing. sell sports and music channels in one bundle to both types of viewers. sell only sports channels to the first type of viewers and sell only music channels to the second type of viewers.Question 5: Jimmy has a room that overlooks, from some distance, a major league baseball stadium. He decides to rent a telescope for $50 a week and charge his friends and classmates to use it to peep at the game for 30 seconds. He can act as a monopolist for renting out "peeps". For each person who takes a 30 second peep, it costs Jimmy $.20 to clean the eyepiece. Jimmy believes he has the following demand for his service: Price of a Peep $1.20 Quantity of peeps demanded 1.00 90 100 150 200 250 300 70 60 50 350 40 30 400 450 20 10 500 550 a) For each price, calculate the total revenue from selling peeps and themarginal revenue per peep. Price Quantity TR MR $1.20 100 90 100 150 200 70 250 60 300 350 50 40 30 400 450 20 500 10 550 b) At what quantity will Jimmy's profit be maximized? What price will he charge? What will his total profit be? c) Jimmy's landlady complains about all the visitors coming into the building and tells Jimmy to stop selling peeps. Jimmy discovers, though, if he…The information in the table below shows the total demand for premium-channel digital cable TV subscriptions in a small urban market. Assume that each digital cable TV operator pays a fixed cost of $200,000 (per year) to provide premium digital channels in the market area and that the marginal cost of providing the premium channel service to a household is zero. 1. Assume there are two profit-maximizing digital cable TV companies operating in this market. Further assume that they are not able to collude on the price and quantity of premium digital channel subscriptions to sell, how many premium digital channel cable TV subscriptions will be sold altogether and what price will be charged when this market reaches a Nash equilibrium? 2. Under the conditions given in Question #3 of this problem, how much profit will each firm earn when this market reaches a Nash equilibrium? 3. What is the socially efficient level of digital premium channel subscriptions for this market and at what…
- MelCo’s Xamoff The global pharmaceuticals giant, MelCo, has had great success with Xamoff, and over-thecounter medicine that reduces exam-related anxiety. A patent currently protects Xamoff from competition, although rumors persist that similar products are in development. Two years ago, MelCo sold 25 million units for a price of $10 for a package of ten. Last year it raised the price to $11, and sales fell to 22 million units. Finally, a financial analyst estimates the cost of production at $2 per package. (a) Estimate the elasticity of demand for this product at $10. Is this price too high or too low? (b) Estimate the elasticity of demand for this product at $11. Is this price too high or too low? (c) Based on your answers to (a) and (b), what can we say about MelCo’s profit-maximizing price?34 Suppose you run a resort just outside of Mesquite, Nevada. The following table represents the maximum willingness to pay for one night stay and one round of golf for David and John. Assume the marginal cost of a one night stay is $20 and $0 for a round of golf. David John $50 $110 $80 $35 If you set prices for lodging and golf individually, you will charge $ type your answer... One night stay: One round of golf: for one night's stay, $ type your answer... for one round of golf, and earn a profit of $ type your answer... If instead you bundle a one-night stay with a round of golf, you will charge $ type your answer... for the bundle and earn a profit of $ type your answer...Hubert owns a plot of land in the desert that isn't worth much. One day, a giant meteorite falls on his property, making a large crater. The event attracts scientists and tourists, and Hubert decides to sell nontransferable admission tickets to the meteor crater to both types of visitors: scientists (Market A) and tourists (Market B). The following graphs show daily demand (D) curves and marginal revenue (MR) curves for the two markets. Hubert’s marginal cost of providing admission tickets is zero Suppose that at first, Hubert charges the same price of $8 per admission in both markets so that the total number of admissions demanded is_______tickets. Suppose now that Hubert decides to charge a different price in each market. To maximize revenue, Hubert should charge_________per admission in Market A and________per admission in Market B. At these prices, he will sell a total quantity of __________admission tickets per day. Complete the following table by calculating…
- 2. Jack is the owner of the only local bar in a small town. He sells whiskey in one-ounce glasses. For simplicity, let's assume it doesn't cost Jack anything to run his business. There are two customers, Adam and Burt who are twin brothers. Adam's demand function is ya = 16 – 2p, and Burt's demand function is yg = 8- p (price is measured in dollars and quantity is measured %3D by ounces). Jack knows their demand functions, but the problem is that he cannot tell them apart since they look exactly the same to him. To increase his profits, Jack offers the following two options that his customers can choose from: (1) You can pay $T1 up front and drink as much as you want; or (2) Pay $T2 up front and the price per ounce of whiskey will be $p. 2.a If p = 4, what is the maximal T2 that Jack can charge so that Burt is willing to come to the bar? 2.b What is the maximal T, that Jack can charge so that Adam will choose the first pricing option?2. The market for dark chocolate us characterized by Cournot duopolists - Honeydukes and Wonka industries. The market demand for dark chocolate is:P = 8 - 0.005Qdwhere P is the price per bar in dollars and Qd is dark chocolate's daily quantity demanded in bars (use qh to represent the quantity of dark chocolate sold by Honeydukes and qw to represent the quantity of dark chocolate sold by Wonka Industries). Honeydukes has a constant marginal cost of $2.50 per bar, while Wonka Industries has a constant marginal cost of $3.00 per bar. The firms move simultaneously in choosing their profit-maximizing quantity of output.a. Given the firms move simultaneously, what is the equation for Honeydukes' reaction function with qh expressed as a function of qw?b. Given the firms move simultaneously, what is the equation for Wonka's reaction function with qw expressed as a function of qh?c. What quantity of dark chocolate will each firm produce in equilibrium and what price will be established for a…Your firm has a monopoly over of two products, Good 1 and Good 2. Both products are produced at a constant marginal cost of $25. You face four consumers (or groups of consumers) with the following reservation prices: (Image)Suppose that you have three alternative pricing strategies: i) individual pricing, ii) pure bundling, and iii) mixed bundling. For each strategy, determine the optimal prices to be charged, which consumer buys which product and the resulting profit. Which pricing strategy would yield the largest profit? Consumer B C D Good 1 (S/unit) 15 40 70 85 Good 2 (S/unit) 90 45 30 20
- Scenario 15-7 Black Box Cable TV is able to purchase an exclusive right to sell a premium movie channel (PMC) in its market area. Let's assume that Black Box Cable pays $75,000 a year for the exclusive marketing rights to PMC. Since Black Box has already installed cable to all of the homes in its market area, the marginal cost of delivering PMC to subscribers is zero. The manager of Black Box needs to know what price to charge for the PMC service to maximize her profit. Before setting price, she hires an economist to estimate demand for the PMC service. The economist discovers that there are two types of subscribers who value premium movie channels. First are the 4,000 die-hard TV viewers who will pay as much as $150 a year for the new PMC premium channel. Second, the PMC channel will appeal to 20,000 occasional TV viewers who will pay as much as $20 a year for a subscription to PMC. Refer to Scenario 15-7. If Black Box Cable TV is able to price discriminaté, what would be the maximum…3. A Tennis Club has asked you to devise a profit-maximizing pricing strategy. It is known that a typical player's demand is given by P =40-20, where P is the price of 1 hour court time on the club's indoor tennis court, and Q is the number of hours of court time an individual player would demand during the tennis season. The marginal cost of 1 hour of court time is $2 and that fixed costs are practically zero. a) Calculate the profit-maximizing price and Tennis Club's profits (per player) assuming a per-unit price is charged each customer. b) Determine the profit-maximizing price and Tennis Club's profits (per player) assuming a two-part pricing strategy is adopted for each customer. Your answers: a) per-unit price strategy price profits b) two-part pricing strategy price profitsScenario 15-7 Black Box Cable TV is able to purchase an exclusive right to sell a premium movie channel (PMC) in its market area. Let's assume that Black Box Cable pays $150,000 a year for the exclusive marketing rights to PMC. Since Black Box has already installed cable to all of the homes in its market area, the marginal cost of delivering PMC to subscribers is zero. The manager of Black Box needs to know what price to charge for the PMC service to maximize her profit. Before setting price, she hires an economist to estimate demand for the PMC service. The economist discovers that there are two types of subscribers who value premium movie channels. First are the 4,000 die-hard TV viewers who will pay as much as $150 a year for the new PMC premium channel. Second, the PMC channel will appeal to 20,000 occasional TV viewers who will pay as much as $20 a year for a subscription to PMC. Refer to Scenario 15-7. What is the deadweight loss associated with the nondiscriminating pricing…