Question

In: Economics

Kip’s Auto Detailing has locations in two distant neighborhoods, Uptown and Downtown. Uptown customers’ demand is...

Kip’s Auto Detailing has locations in two distant neighborhoods, Uptown and Downtown. Uptown customers’ demand is given by QUT=1,000−10PQUT=1,000−10P, where Q is the number of cars detailed per month; Downtown customers’ demand is QDT=1,600−20PQDT=1,600−20P. The marginal and average cost of detailing a car is constant at $20.

a. Determine the price that maximizes Kip’s profit if he prices uniformly in both markets. How many customers will he serve at each location? What are his total profits?

P = $

QUT =

customers

QDT =

customers

Profit = $

b. Suppose Kip decides to charge different prices at each location. What price should he establish in each location? What are his total profits?

PUT = $

PDT = $

Profit = $

c. How big are the gains to Kip’s differential pricing scheme?

$333.66

$999.33

$666.66

$500.33

Solutions

Expert Solution

Happy to clarify any doubts


Related Solutions

An ambulance station has one vehicle and two demand locations, A and B. the probability that...
An ambulance station has one vehicle and two demand locations, A and B. the probability that the ambulance can travel to a location in under 8 minutes is .58 for location A and .42 for location B. the probability that the ambulance is busy at any point in time is .30. a. Find the probability that EMS can meet demand for an ambulance at Location A. b. Find the probability that EMS can meet demand for an ambulance at location...
US Bank has recorded the number of customers who used a downtown ATM during the noon...
US Bank has recorded the number of customers who used a downtown ATM during the noon hour (variable of interest) on 21 randomly selected workdays. The data is given below, 16, 17, 12, 27, 22, 28, 15, 16, 29, 22, 11, 19, 27, 23, 18, 24, 21, 11, 40, 42, 43. Please show your complete manual work, use statistical notations wherever possible, and do not classify the data in answering the following questions. ​a. Compute the Sample Average of customers...
Assume a firm faces two customers in the market. Customer 1 has an inverse demand of...
Assume a firm faces two customers in the market. Customer 1 has an inverse demand of p=100−q1​, and Customer 2 has an inverse demand of p=180−q2. Marginal cost per unit is constant and equal to ​$50. Determine the profit the firm could make if it could charge each customer a different access fee. When charging different access fees to both​ customers, profit equals ______ ​(Enter a numeric response using a real number rounded to two decimal​ places.) Assume the​ profit-maximizing...
3.Consider a coffee shop that has two types of customers: lawyers and doctors. The demand for...
3.Consider a coffee shop that has two types of customers: lawyers and doctors. The demand for espresso by lawyers is given by QL= 18 –3P, where P Is measured in dollars and Q Is measured in ounces. The demand for espresso by doctors is given by QD= 10 –2P. There are equal numbers of lawyers and doctors. The marginal cost of an ounce of espresso is $2. (a)Suppose that the coffee shop can identify which customer is a doctor and...
1. If a firm has two groups of customers whose elasticities of demand are different, how...
1. If a firm has two groups of customers whose elasticities of demand are different, how does it determine what prices to charge each group? a. Sets the price (P) equal to marginal revenue (MR) equal to marginal cost (MC) in each market. b. Sets the MR in each market equal to the firm’s MC and sets the price for each group by finding the prices on each group’s demand curve above where MR=MC. c. Sets MC equal to P...
An auto dealership is attempting to determine the preferences of its customers. The dealership has employed...
An auto dealership is attempting to determine the preferences of its customers. The dealership has employed your marketing research firm to determine the specific features of automobiles most desired by prospective customers. Discuss how you will construct a scale to achieve that objective.
(3) A family owns a restaurant that has two locations: one in the town of Rabbit...
(3) A family owns a restaurant that has two locations: one in the town of Rabbit Hash, Kentucky and the other in the town of Deer Lick, Kentucky. The owners of the restaurants want to know if there is a difference in the tenure of their employees (how long an employee works there from hiring to quitting / firing) between the two locations. They collect the following data on the tenure of six recent employees. The data is the number...
Frank’s Foods has a warehouse that supplies products to its store locations. The warehouse has two...
Frank’s Foods has a warehouse that supplies products to its store locations. The warehouse has two service departments, Information Services (S1) and Operation Support (S2), and two operating departments, Order Processing (P1) and Delivery (P2). As an internal auditor, you are checking the company’s procedures for cost allocation. You find the following cost allocation results for September:    Costs allocated to P1 $ 41,000 from S1 ? from S2 Costs allocated to P2 ? from S1 $ 26,700 from S2...
There are two groups of customers in the market. Demand of group number 1 is Q1(p)...
There are two groups of customers in the market. Demand of group number 1 is Q1(p) = 3−0.5p, and demand of group number 2 is Q2(p) = 5−2p. The market is served by a monopolist with MC = 1. (a) Write down the market demand function (remember that demand function should be welldefined for all possible prices). Plot it. (b) Derive the MR(Q) for the market demand and plot it on the graph from above. (c) What price will the...
A company has two locations that provide technical support to cell phone costumers, office A and...
A company has two locations that provide technical support to cell phone costumers, office A and Office B. An analyast suspects that the variance of the time it takes to resolve costumer issues is higher at office A than office B. The analyast takes a random sample of 16 issues at office A and measures time to resolution and finds a variance of 102. A random sample of 21 issues at office B has a variance of 64.3. The analyast...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT