Two customers, Bob and Ed, with two types of services: premium (P) and simple (S). Bob’s...

Two customers, Bob and Ed, with two types of services: premium (P) and simple (S).

Bob’s willingness to pay for the premium service is given by uB(P) and for the simple service is uB(S). Similarly, for Ed, these values are uE (P) and uE (S), respectively.

Suppose these values are given as: uB(P) = 500, uB(S) = 200, uE(P) = 300, uE(S) = 100.

The seller of these services is looking to maximize the total payment. 1. If the seller could only set a single price say p, for premium and simple services, what price would be chosen? 2. If the seller could set different prices, say Ppr and Psm, what prices would she choose?

Expert Solution

Answer.

1. If the seller wants to maximize the payment, he will set the lower proce for premium and simple, as both the buyers will be able to buy and this will give seller maximize profit. So, seller will set price for premium as 300 and, price of simple as 100.

2. If the seller can charge different price for each customer, he will charec price that both Bob and Ed will be willing to pay, so he will charge Bob 500 for premium and 200 for simple.

And, he will charge Ed 300 for premium and 100 for simple.

Rahul Sunny answered 2 years ago

A simple subsidy (s) reduces the price of a good from P to P-s. On the...

A simple subsidy (s) reduces the price of a good from P to P-s. On the other hand, a voucher scheme grants to the consumer the ability to consume a stated quantity of the good (label it X1s on the horizontal axis) in exchange for the voucher (which has no cost). Assume the high school graduating class of 2018 in Columbia received a voucher that would cover all tuition and fees for either 60 hours at a community college or...

Consider a simple underwater exchange economy where two consumers, Bob (b) and Sandy (s), consume Jellyfish...

Consider a simple underwater exchange economy where two consumers, Bob (b) and Sandy (s), consume Jellyfish (j) and Krabby Patty burgers (k). Assume that the economy starts with the following initial allocation: Bob has 6 and Sandy has 2 Jellyfish (??=6,??=2) Bob has 4 and Sandy has 12 Krabby Patty burgers (??=4, ??=12) a. Use an Edgeworth box to represent this simple allocation economy. Make sure to locate the initial endowment and label it E. Measure goods for Bob from...

Q1. Shine Bright Housekeeping provides two types of housekeeping services, Basic and Gold. It charges customers...

Q1. Shine Bright Housekeeping provides two types of housekeeping services, Basic and Gold. It charges customers $30 for a unit of Basic service and $50 for a unit of Gold service. Its direct costs in providing each unit of service are: Basic $9, Gold $15. All other costs of the business are fixed and total $7,350 per month. In all the sub-parts of this part (i.e., part 3.1, 3.2, etc.), assume that Shine Bright always provides a constant mix of...

There are two types of seismic waves associated with every earthquake, called P and S waves....

There are two types of seismic waves associated with every earthquake, called P and S waves. They travel in every direction away from the source of an Earthquake called the epicenter. Because they each travel with different speeds, seismologists can determine the distance from a seismic station to an epicenter. An earthquake occurred in an area when a P wave travels at 5 km/s and the S wave travels at 3 km/s. A seismic station measures an SP lag time...

The types of institutional food services the meals may be delivered to the customers or clients...

The types of institutional food services the meals may be delivered to the customers or clients in hospital in this situation.

Agnieszka ‘s Opera House can sell tickets to two types of customers: music lovers and tourists....

Agnieszka ‘s Opera House can sell tickets to two types of customers: music lovers and tourists. Assume for simplicity that each customer will purchase one ticket only. Assume (for simplicity) that the cost of providing the ticket is zero. The valuation or willingness to pay ($ per ticket) each type of buyer places on both types of tickets is presented below: Tourist Music lover Ticket Normal seats 50 100 VIP seats 50 400 Which of the following pricing schemes yields...

A) If two events A and B are __________, then P(A and B)=P(A)P(B). complements independent simple...

A) If two events A and B are __________, then P(A and B)=P(A)P(B). complements independent simple events mutually exclusive B) The sum of the probabilities of a discrete probability distribution must be _______. less than or equal to zero equal to one between zero and one greater than one C) Which of the below is not a requirement for binomial experiment? The probability of success is fixed for each trial of the experiment. The trials are mutually exclusive. For each...

Two shops A and B attract two types of customers: price-sensitive customers, who shop at the...

Two shops A and B attract two types of customers: price-sensitive customers, who shop at the lower-priced shop, and time-sensitive customers, who shop at whichever shop is on their side of the street. A customer of either type purchases on average 10 goods. Assume there are 800 price-sensitive customers and 500 time-sensitive customers buying goods on any given day. The wholesale price the shop pay per good is $3. For simplicity, assume that they can charge $3.50, $4.00, or $4.50...

2) S&P Supply sells only two products, Product S and Product P. Product S Product P...

2) S&P Supply sells only two products, Product S and Product P. Product S Product P Selling price per unit $25 $50 Variable cost per unit $20 $30 Fixed costs $225,000 a) What is the firm’s breakeven sales in dollars, assuming a sales (revenue) mix of 20% Product S and 80% Product P? b). Suppose the firm generated the amount of sales in dollars needed to break even, assuming a sales mix of 20% Product S and 80% Product P....

Two types of customers make up the market for Armoyas. There are 100 type A customers,...

Two types of customers make up the market for Armoyas. There are 100 type A customers, each of whom is willing to pay up to $10 for an Armoya. There are 50 type B customers, each willing to pay up to $8 for an Armoya. No customer wishes to buy more than a single Armoya. The monopolist cannot differentiate between the types of customer. The average and marginal cost of production is constant at $6/Armoya. a)What is the selling price...

Question