Question
In: Economics
Suppose a business firm faces the following demand equation: Q = 40 – 0.5P. Marginal cost...
Suppose a business firm faces the following demand equation: Q = 40 – 0.5P. Marginal cost is MC = $20. Now suppose the firm decides to offer quantity discount by selling the product in bundles of 10 units.
a. What is the maximum price that the firm can charge for the first 10 units, for the second 10 units, and for the third 10 units? Now compute the revenue and cost of selling the three bundles (a total 30 units) .
b. Which pricing strategy (quantity discount or two-part) is more beneficial to the business? Why?
b. Which pricing strategy (quantity discount or two-part) is more beneficial to the business? Why?
Solutions
i hope this would help you.
Rahul Sunny answered 1 year agoRelated Solutions
Suppose a business firm faces the following demand equation: Q = 40 – 0.5P. Marginal cost...
Suppose a business firm faces the following demand equation: Q =
40 – 0.5P. Marginal cost is MC = $20.
a. Suppose the firm applies the two-part pricing strategy.
Compute the fixed fee, variable (per unit) fee, output, revenue and
cost associated with this pricing.
b. What type of businesses should consider implementing the
two-part pricing strategy? Please explain.
Suppose a business firm faces the following demand equation: Q = 40 – 0.5P. Marginal cost...
Suppose a business firm faces the following demand equation: Q =
40 – 0.5P. Marginal cost is MC = $20.
b. What type of businesses should consider implementing the
two-part pricing strategy? Briefly explain your answer
a. Suppose the firm applies the two-part pricing strategy.
Compute the fixed fee, variable (per unit) fee, output, revenue and
cost associated with this pricing
Suppose a monopolist faces a market demand curve Q = 50 - p. If marginal cost...
Suppose a monopolist faces a market demand curve Q = 50 - p. If
marginal cost is constant and
equal to zero, what is the magnitude of the welfare loss? If
marginal cost increases to MC = 10, does welfare loss increase or
decrease? Use a graph to explain your answer
Suppose a monopolist faces a market demand curve Q= 120 - 2p. a. If marginal cost...
Suppose a monopolist faces a market demand curve Q= 120 - 2p. a.
If marginal cost is constant and equal to zero, what is the
magnitude of the welfare loss? b. If marginal cost increases to MC=
10, does welfare loss increase or decrease? Use a graph to explain
your answer.
Assume a firm faces the following demand and cost functions: Demand is: Q = 2600 –...
Assume a firm faces the following demand and cost functions:
Demand is: Q = 2600 – 100P + 0.2M – 500Pr ; AVC = 20 – 0.07Q +
0.0001Q^2; M = $20,000; Pr = $2; Should the firm shut down in the
short-run? What are the expected profits if fixed costs are
$22,500?
A monopolist with marginal cost of MC=Q faces a demand curve of QD = 20 -...
A monopolist with marginal cost of MC=Q faces a demand curve of
QD = 20 - 2P. This implies that P = 10 - (1/2)Q and that the
marginal revenue is MR = 10 - Q. a. Sketch demand, marginal
revenue, and marginal cost curves. b. What quantity and price will
the monopolist set? c. What quantity and price would the monopolist
set if it produced at the efficient market outcome where P=MC? d.
Identify the CS, PS and DWL...
3. A yoga classroom faces two demand curves. The demand by local residents is Q=100-0.5P, and...
3. A yoga classroom faces two demand curves. The demand by local
residents is Q=100-0.5P, and the demand by nonlocal residents is
Q=200-0.5P. The marginal cost of serving either local or nonlocal
residents is constant at $100. If the yoga classroom practices
third-degree price discrimination, it will charge local and
nonlocal residents a price of _____ and _____, respectively.
a. $150; $250
b. $100; $200
c. $250; $350
d. $200; $300.
How many people will they serve if they charge...
Consider a monopoly firm that faces the following demand curve, total cost curve, and marginal cost: P(Q) = 120 – 4Q; TC(Q) = 400 + 4Q; MC = 4
Consider a monopoly firm that faces the following demand curve,
total cost curve, and marginal cost: P(Q) = 120 – 4Q; TC(Q) = 400 +
4Q; MC = 4a. What is the marginal revenue (MR) equation?b. Determine the profit maximizing level of production for this
monopolist.c. What is the price that the monopolist will charge at the
profit maximizing level of production?d. What is the monopolists’ profit at the profit maximizing
level of output?e. Suppose the government regulates the industry...
A monopolist with constant average and marginal cost equal to 8 faces demand Q = 100...
A monopolist with constant average and marginal cost equal to 8
faces demand Q = 100 - P, implying that its marginal revenue is MR
= 100 - 2Q. (Wrong question Its profit maximizing quantity is ...
should be deadwieght loss) the deadweight loss is Select one:
a. 1058
b. 966
c. none of the answers.
d. 3680
Suppose that a monopoly faces the demand, marginal revenue, and cost schedules below. Quantity Price Marginal...
Suppose that a monopoly faces the demand, marginal revenue, and
cost schedules below.
Quantity
Price
Marginal Revenue
Marginal Cost
Average Total Cost
1
230
230
100
150
2
210
190
100
125
3
190
150
100
116.6666667
4
170
110
100
112.5
5
150
70
100
110
6
130
30
100
108.3333333
7
110
-10
100
107.1428571
8
90
-50
100
106.25
9
70
-90
100
105.5555556
10
50
-130
100
105
What quantity maximizes profit?
The monopoly Q =...
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