Joe has just moved to a small town with only one golf course, the Northlands GolfClub. His inverse demand function is p = 120 - 2q, where q is the number of rounds of golf thathe plays per year. The manager of the Northlands Club negotiates separately with each personwho joins the club and can therefore charge individual prices. This manager has a good ideaof what Joe's demand curve is and offers Joe a special deal, where Joe pays an annualmembership fee and can play as many rounds as he wants at $20, which is the marginal costhis round imposes on the club. What membership fee would maximize profit for the club? Themanager could have charged Joe a single price per round. How much extra profit does theclub earn by using two-part pricing?

Given, Joe's inverse demand curve, p = 120 - 2q. Marginal cost = $20 Thus, at marginal cost $20,…

Answered: Joe has just moved to a small town with…

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter10: Consumer Choice Theory

Section: Chapter Questions

Problem 14P

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Joe has moved to a small town with only one golf course. His demand curve is P = 120 – 2Q where Q is the number of rounds of golf he plays per year. The manager of the golf course offers Joe a special deal, where Joe pays an annual membership fee and can play as many rounds of golf as he wants to at $20 per round. The golf course’s Marginal Cost is $20. - If the golf course wishes to implement a two-part pricing model, what membership fee will maximize revenue for the golf course? Please show your calculations. - How many rounds of golf will Joe play per year (calculate the value of Q*)? Please explain. - Would someone who just occasionally plays golf (perhaps 1 or 2 rounds once every 2 months) prefer two-part pricing as given above, or would they prefer to pay a price of $100 per round without any membership fee? Please explain.
Homework(Ch 15) 7. Price discrimination and welfare Suppose Barefeet is a monopolist that produces and sells Ooh boots, an amazingly trendy brand with no close substitutes. The following graph sho the market demand and marginal revenue (MR) curves Barefeet faces, as well as its marginal cost (MC), which is constant at $30 per pair of Ooh boots. For simplicity, assume that fixed costs are equal to zero; this, combined with the fact that Barefeet's marginal cost is constant, means that marginal cost curve is also equal to the average total cost (ATC) curve. First, suppose that Barefeet cannot price discriminate. That is, it must charge each consumer the same price for Ooh boots regardless of the consumer's willingness and ability to pay. On the following graph, use the black point (plus symbol) to indicate the profit-maximizing price and quantity. Next, use the purple points (diamon symbol) to shade the profit, the green points (triangle symbol) to shade the consumer surplus, and the…
You are in the market for a new couch and havefound two advertisements for the kind of couchyou want to buy. One seller notes in her ad that sheis selling because she is moving to a smaller apartment, and the couch won’t fit in the new space.The other seller says he is selling because the couchdoesn’t match his other furniture. Which seller doyou expect to buy from? Why? ( Hint: Think whowould be the more motivated seller.)
Tuan lives in a town with only one movie rental store. Suppose Tuan's demand for movie rentals per month is Q = 16 - 2P. The movie store currently charges $5 per movie but is thinking of adding a flat monthly cardholder fee and dropping the price to $2 per rental. At this new price, what is the largest cardholder fee that Tuan will pay? If the rental store has a constant marginal cost of $2, which strategy is more profitable?
Sam is a personal trainer working for private clients. He just moved from California to a city on the East Coast and he needs to create his newclient base. A colleague told him that on the East Coast personal trainers face an inverse demand P = 300 – 20Q, that is when working with Qclients, a personal trainer can find one more client willing to pay P = 300 – 20Q for a weekly training session. Sam’s opportunity cost of a twohour training session is MC = 10Q. We make the heroic assumption that clients are infinitely divisible so that we can use calculus to solveSam’s profit maximizing problems.At first, Sam doesn’t read East Coasters that well and he can’t tell who is willing to pay more money for training sessions. Hence, he chargesall clients the same price.a) In part naively in part to get to know more people, Sam decides to sign up any customer willing to pay a price at least as high as his marginalcost of time. That is, Sam behaves like a price-taker. How many clients does he…
Identify the five pricing policy decisionsmarketers must make
Joe has just moved to a small town with only one golf course, the Northlands Golf Club. His inverse demand function is p = 120 - 2g, where q is the number of rounds of golf that he plays per year. The manager of the Northlands Club negotiates separately with each person who joins the club and can therefore charge individual prices. This manager has a good idea of what Joe's demand curve is and offers Joe a special deal, where Joe pays an annual membership fee and can play as many rounds as he wants at $20, which is the marginal cost his round imposes on the Club. Joe marries Susan, who is also an enthusiastic golfer. Susan wants to join the Northlands Club. The manager believes that Susan's inverse demand curve is p = 100 - 2q. The manager has a policy of offering each member of a married couple the same two-part prices, so he offers them both a new deal. What two-part pricing deal maximizes the club's profit? Will this new pricing have a higher or lower access fee than in Joe's…
Jackistheowneroftheonlylocalbarinasmalltown.Hesellswhiskeyin 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 yB = 8 – p (price is measured in dollars and quantity is measured 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. 1.a If p = 4, what is the maximal T2 that Jack can charge so that Burt is willing to come to the bar? 1.b What is the maximal T1 that Jack can charge so that Adam will choose the first pricing option?
3.In Avenger City, there are various fried chicken consumers withFea es like Captain America, Thor and Black panther. Consumers with Characteristics of Captain America has a demand function for fried chicken with DCA(p)=10-2p, while Thor is DT(p)=5-p and Black Panther is DBP(p)=20-4p. The number of consumers with characteristics such as Captain America is 50, Thor 100 and Black Panther 150. If the price of Fried Chicken is $5, then:A. What is the total demand for fried chicken for consumers withFeatures like Captain America?B. What is the total demand for fried chicken for consumers withFeatures like Thor?C. What is the total demand for fried chicken for consumers withFeatures like Black Panther?D. What is the total demand at market level for fried chicken whenthe price is $5? If the price of fried chicken is $10, then:A. What is the total demand for fried chicken for consumers withFeatures like Captain America?B. What is the total demand for fried chicken for consumers withFeatures…
Hiro, Francesca, and Luis are the only three buyers of gold in a small mining town. Their inverse demand functions for gold are as follows: Hiro: p = 20 - Qu Francesca: p = 10- Luis: p= 5-0 QQF. and Q are the quantities (in ounces) demanded by Hiro, Francesca, and Luis, respectively. L 9th attempt Because Hiro, Francesca, and Luis always go shopping for gold together, the seller must sell at the same price all of them. Suppose the seller is selling 13.00 ounces of gold. Then the marginal revenue equals $13.5 Give your answer to two decimals.
Joe has just moved to a small town with only one golf course, the Northlands Golf Club. His inverse demand function is p = 120-2q, where q is the number of rounds of golf that he plays per year. The manager of the Northlands Club negotiates separately with each person who joins the club and can therefore charge individual prices. This manager has a good idea of what Joe's demand curve is and offers Joe a special deal, where Joe pays an annual membership fee and can play as many rounds as he wants at $40, which is the marginal cost his round imposes on the Club. What membership fee would maximize profit for the Club? The manager could have charged Joe a single price per round. How much extra profit does the Club earn by using two-part pricing? The profit-maximizing membership fee (F) is $ . (Enter your response as a whole number.)
Now, suppose that Barefeet can practice perfect price discrimination that is, it knows each consumer's willingness to pay for each pair of Ooh boots and is able to charge each consumer that amount. On the following graph, use the black point (plus symbol) to indicate the profit-maximizing quantity sold and the lowest price at which the firm sells its boots. Next, use the purple points (diamond symbol) to shade the profit, the green points (triangle symbol) to shade the consumer surplus, and the black points (plus symbol) to shade the deadweight loss in this market with perfect price discrimination. (Note: If you decide that consumer surplus, profit, or deadweight loss equals zero, indicate this by leaving that element in its original position on the palette.) PRICE (Dollars per pair of Och boots) 100 90 80 70 60 50 40 30 20 10 0 0 20 MC = ATC Demand 40 60 80 100 120 140 160 180 200 QUANTITY (Pairs of Ooh boots) Monopoly Outcome Profit A Consumer Surplus Deadweight Loss Consider the…

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