You are an online seller of a product competing in a monopolistic competition type of market. Hence, you are more of a price-taker not exactly by choice but more because of the high price elasticity of the demand for your product. The current going-rate price range in the market is between P500 and P700. Your average cost per unit of the product is P600 while your average variable cost per unit of the product is P400. If the average going-rate price goes down to P300, what should you do? Why? If the average going-rate price pegs at P500, what should you do? Why? At the current going-rate price range of between P500 and P700, what strategies will enable you to increase your own selling price to P750 without losing many customers?
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- Suppose you come home from having earned your degree at CSUEB. Your parents own a localchain of fitness clubs that have a great reputation. Your father uses cost-plus pricing, and at themoment he is charging $200 for an annual membership, and is currently selling 800 memberships.Your parents are quite happy with their current markup above average costs You suspect that perhaps they could be doing better and be more profitable. After consulting with the club’s manager, you learn that the cost function for annual memberships is given by c(Q)=1000+20Q+(1/20)Q2 .Further, they tell you that the own price elasticity of demand is approximately -2.5 Are your parents choosing a membership price that is maximizing profit? If not, what would yousuggest – increase the price or reduce the price? ExplainSampson Ltd produces two products that can be produced on either of two machines. Each month, only 5o0 hours of time are available on each machine. The time required to produce each item by hour and machine is: Machine Machine Product 1 Product 2 3 4 Month Month 1 Month 2 Month 1 Demand Demand Price Price Product 1 100 160 $45 $65 $10 Product 2 120 110 $35 The demand and price point for each product that customers are willing to pay are above. The company goal is to maximize revenue from sales from the next two months. Based on the provided information, how many constraints does this problem have excluding the non-negativity constraints?HP has developed a new, high-end, high-resolution printer, which can print 40 pages per minute. Its market research identified two target segments of customers: 3,500 large businesses and 6,500 university labs. A large business has a valuation of $900 for the new printer, whereas a university lab has a valuation of $630. HP’s variable cost for the printer is $450/unit; all fixed costs are sunk. Assume that each customer needs at most one new HP printer (i.e., no customer will buy multiple units). (a) Suppose that HP cannot price discriminate the two segments of customers, i.e., it can charge only one price for its printer. What is HP’s optimal price for the new printer? What is its maximum profit? (b) Suppose that HP can install an extra chip in the printer to slow down printing to 15 pages per minute. Such a chip costs HP $20 to make and install for each printer. The slower version of the printer is valued at $700 by a large business customer and $600 by a university lab. With…
- Please type your NUMERICAL answer in the space below. ENTER ONLY THE NUMBER. IF answers are in decimals, please round the number to one decimal point. Winterfell Cable TV pays $100,000 per year to earn exclusive rights to air a premium sports channel. There are two types of subscribers in Winterfell: 3,000 die-hard sports fans who will pay as much as $200 a year for the new channel and 20,000 occasional sports viewers who will pay as much as $25 a year for a subscription to it. a) If Winterfell Cable is unable to price discriminate, what price will it charge and how much are its profits? Price Profits= b) If Winterfell Cable is able to price discriminate, how much will it make in profits? Profits= What is the deadweight loss associated with the nondiscriminating pricing policy compared to the price c) discriminating policy? DWL=Forty thousand potential customersof a cable TV franchise are each willing to pay $11/month for HBO and $11/month for Cinemax. Twenty thousand potential customers are willing to pay $20/month for HBO and only $5/month for Cinemax. Assume costs are zero. If the franchise sells the two services in a bundle, it should charge1: $312: $253: $224: $205: $18Roger Clark obtains long-stem roses from Fred’s Flowers each Friday for sale to the public. Fred generally sells Roger flowers that, if left over the weekend, would likely be unsalable the next week. Hence, he is willing to give Roger a good price on his remaining long-stem roses and to take back any roses that are not sold over the weekend and give Roger partial credit for them. Roses are sold to Roger in quantities or units of one dozen each and at a price of $10 per dozen. Roger sells the roses for $15 per dozen, and any remaining unsold over the weekend can be returned to Fred at a credit of $8 per dozen. Although the number of roses remaining to be sold at the end of the week varies, Fred is willing to let Roger have as many as six dozen each weekend and supply him with fresh flowers at the same price if Roger desires more than the quantity of “old” roses that Fred has. Characterize this decision problem both in terms of the various states of nature (demands) and in terms of the…
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- A decorator, who is a monopolist, makes two types of specialty picture frames. From experience, the decorator has determined that if x frames of the first type and y frames of the second type are made and put on sale in a showroom, they can be sold for (100 - 2x) dollars and (120 - 3y) dollars each, respectively. The total cost of constructing these frames is (12x + 12y + 4xy) dollars. How many frames of each type should be produced to realize the maximum profit. and what is the maximum profit? Make sure to verify that this is indeed a maximum.Suppose Always There Wireless serves 100 high-demand wireless consumers, who each have a monthly demand curve for wireless minutes of QH= 200 - 100P, and 300 low-demand consumers, who each have a monthly demand curve for wireless minujes of O, = 100 - 100P, where Pis the per-minute price in dollars. The marginal cost is $0.25 per minute. Suppose Always There Wireless charges $0.30 per minute, If Always There Wireless charges the highest fixed fee that it can without losing the low-demand consumers, what is the profit from sales to each of the high-demand consumers? $33.00 $28.00 O $28.13 $24.50A discount shoe store always runs a ’buy one, get one free (limit one free pair per customer)’ campaign. A customer asked a clerk, if he would sell her one pair for half price. The clerk answered, ”I’m sorry, I can’t do that.” but when the customer decided to leave the store, the clerk hastily offered, “However, I think I can give you a 40% discount on any pair in the store.” Assuming the consumer has $200 to spend on shoes (X) or all other goods (Y ), and that shoes cost $100 per pair: a. Illustrate the consumer’s opportunity set with the ”buy one, get one free” deal and with a 50 percent discount. b. Why was the 40 percent discount offered only after the consumer rejected the ”buy one, get one free” deal and started to leave the store? c. Why was the clerk willing to offer a ”buy one, get one free” deal, but unwilling to sell a pair of shoes for half price?