Demand for hotel rooms in Tallahassee takes two possible values: on game days, demand is described by the demand curve q = 100−p, while on non-game-days demand is described by the demand curve q = 60 − 2p.

(a) Suppose that the hotel price on game days is ph = 80. What quantity is demanded at this price?

(b) Find the inverse demand curve on non-game-days. Assuming that the price on game days is ph = 80 as above, what price would induce the same quantity demanded on non-game-days as on game days?

(c) Plot the demand curves on game days and on non-game-days. Pay careful attention to the price and quantity intercepts for both curves.

(d) Assuming the price on non-game-days is as you found in (ii), what is consumer surplus in this market on non-game-days? What is consumer surplus on game days?

(e) Suppose that you encounter the following claim: “Because the hotel price is higher on game days than on non-game-days, consumer surplus in the hotel market must be lower on game days.” What is wrong with this claim?

Price discrimination is a pricing strategy where different groups of consumers are charged different amounts for the same good. This is further divided into direct and indirect categories with direct price discrimination charging different prices to different groups of consumers such as adults vs children or students vs non students and indirect discrimination charging different prices based on features that consumers are willing to pay for such as a cruise ship ticket that offers interior, exterior or balcony cabins. Direct price discrimination would be more advantageous with products that are marketed to varying groups or geographic areas. Pharmaceutical companies often use direct price discrimination to charge different prices to different countries with America being the highest. They then pursue legislation to prevent Americans from importing medication from lower paying countries If a product is not marketed to a diverse group then direct price discrimination may not be the best strategy. In these situations, it is still possible that indirect price discrimination could be a good strategy. This works best for products with a variety of options or features that consumers are willing to pay for. An example of this can be seen in the selling of automobiles. The price will change based on the different features that a consumer selects.    

Please respond in 100-150 words

A juice shop in Santa Barbara serves two types of consumers: tourists and locals. Tourists’ inverse demand per day is P(q) = (50−q)/5 . Locals’ inverse demand per day is P(q) = (500−q)/ 50 . In order to sell a total of 55 juice bottles per day, what price should the shop charge per bottle? (a) $12 (b) $10 (c) $9 (d) $8 3.

(continued from previous question) Assume that the number of tourists coming to Santa Barbara double. (This means that demand from tourists at every price level doubles.) But, at the same time, due to an economic recession, the local demand becomes more price sensitive. P(q) = (500−q)/ 100 .

Which statement is correct?

(a) To maximize revenue, it is optimal to price high enough to only target tourists.

(b) At the revenue maximizing price, there is higher revenue generated from the local population relative to tourists.

(c) The revenue maximizing price is $4 per bottle.

(d) If the tourists stop coming (demand decreases to 0), to maximize revenue the shop owner would increase the price.

A is correct but why?

Imagine that you have placed a limit order to buy 100 shares of Sallisaw Tool at a price of

$ 37.00$37.00?,

although the stock is currently selling for

$ 39.34$39.34.

Discuss the?consequences, if? any, of each of the following situations.a. The stock price drops to

$ 38.16$38.16

per share 2 months before cancellation of the limit order.b. The stock price drops to

$ 37.00$37.00

per share.c. The minimum stock price achieved before cancellation of the limit order was

$ 37.69$37.69.

When the limit order was? canceled, the stock was selling for

$ 45.84$45.84

per share.

a. If the stock price drops to

$ 38.16$38.16

per share 2 months before cancellation of the limit? order, the order

?

will

will not

be executed.???(Select from the? drop-down menu.)b. If the stock price drops to

$ 37.00$37.00

per? share, the order

?

will

will not

be executed.???(Select from the? drop-down menu.)c. The minimum stock price achieved before cancellation of the limit order was

$ 37.69$37.69.

When the limit order was? canceled, the stock was selling for

$ 45.84$45.84

per share. The order

?

will

will not

be executed.???(Select from the? drop-down menu.)

The common stock of the Orange Incorporated has been trading in a narrow price range for the past month, and you are convinced it is going to break far out of that range in the next three months. You do not know whether it will go up or down, however. The current price of the stock is $100 per share, and the price of a three-month at-the-money put option on Orange Incorporated is $5.

a. If the risk-free interest rate is 2% per year, what must be the price of a 3-month at-the-money call option on the Orange Incorporated stock? (Note: ATM options are the options for which the strike price is equal to the current stock price.) The stock pays no dividends.

b. What would be a simple options strategy to exploit your conviction about the stock price’s future movements? To receive a full credit, you should i. Identify which options are involved in your strategy ii. Construct a payoff table and show it in this exam iii. Show payoff of your strategy on a graph

c. How far would the price of the Orange Incorporated have to move in either direction for you to make a profit on your initial investment?

For the current year, LNS corporation reported the following taxable income at the end of its first, second, and third quarters.

Quarter-End Cumulative Taxable Income

First $1,550,000

Second 2,560,000

Third 3,390,000

What are LNS’s minimum first, second, third, and fourth quarter estimated tax payments determined using the annualized income method? (Enter all amounts as positive values. Leave no answer blank. Enter zero if applicable. Round "Annualization Factor" for Fourth quarter to 7 places. Round other intermediate computations and final answers to the nearest whole dollar amount.)

Please fill the blank columns?

Peter has just sold a European call option on 10,000 shares of a stock. The exercise price is $50; the stock price is $50; the continuously compounded interest rate is 5% per annum; the volatility is 20% per annum; and the time to maturity is 3 months.

(a) Use the Black-Scholes-Merton model to compute the price of the European call option.

(b) Find the value of a European put option with the same exercise price and expiration as the call option above.

(c) What position should Peter take in the stock for delta neutrality?

(d) Suppose that Peter does set up a delta neutral position as soon as the option has been sold and the stock price jumps to $55 within the first hour of trading. What trade is necessary to maintain delta neutrality?

Peter has just sold a European call option on 10,000 shares of a stock. The exercise price is $50; the stock price is $50; the continuously compounded interest rate is 5% per annum; the volatility is 20% per annum; and the time to maturity is 3 months.

(a) Use the Black-Scholes-Merton model to compute the price of the European call option.

(b) Find the value of a European put option with the same exercise price and expiration as the call option above.

(c) What position should Peter take in the stock for delta neutrality?

(d) Suppose that Peter does set up a delta neutral position as soon as the option has been sold and the stock price jumps to $55 within the first hour of trading. What trade is necessary to maintain delta neutrality?

Peter has just sold a European call option on 10,000 shares of a stock. The exercise price is $50; the stock price is $50; the continuously compounded interest rate is 5% per annum; the volatility is 20% per annum; and the time to maturity is 3 months.

(a) Use the Black-Scholes-Merton model to compute the price of the European call option.

(b) Find the value of a European put option with the same exercise price and expiration as the call option above.

(c) What position should Peter take in the stock for delta neutrality?

(d) Suppose that Peter does set up a delta neutral position as soon as the option has been sold and the stock price jumps to $55 within the first hour of trading. What trade is necessary to maintain delta neutrality?

Question 2:

The following questions concern court cases involving tacit collusion.

a) The existence of first-run and second-run showings can be interpreted as intertemporal price discrimination. Explain how. Analyze the effects of an increase in the price of admission to a second-run showing. There is no need to draw any graphs here; a complete intuitive explanation is sufficient.

b) In the Cement Institute case, 11 firms bid $3.286854 per barrel on an order of 6,000 barrels. Does this throw up any red flags? Explain.

c) There were four U.S. producers of lead antiknock compounds. Whenever a price change was contemplated, it was announced more than 30 days in advance of the effective date. These price announcements appeared in newspapers. Is this a method of price signaling by which the producers can collude tacitly? Explain.