Afirmthatproducesaccessoriesforsmartphoneshiredamarketingresearchcompany to find out how much its customers are willing to pay for its cases and screen protectors. The marketing research company found that there are only three types of customers with the following willingess to pay for cases and screen protectors:

Customer A Customer B Customer C

Case $3.25 $8.25 $10.00

Screen Protector $6.00 $3.25 $10.00

Bundle $9.25 $11.50 $20.00

As we did in class, assume that there is only one consumer of each type and that each consumer buys at most one case and one screen protector. Assume also that the marginal cost of production is zero.

(a)If the firm were to charge only individual prices (separate pricing), what prices should it set for its cases and screen protectors to maximize profit? What is the firm’s profit?

(b)After conducting a costly study, an outside consultant claims that the company could make more money from its customers if it sold cases and screen protectors together as a bundle instead of separately (pure bundling). Is the consultant right?

(c)Could you suggest a mixed-bundling pricing strategy that could beat (a) and (b)? Explain.

Fresno OY, a Norwegian corporation, wholly owns Ceretony Inc., a subsidiary located and operating in Canada. Given the limited information provided, please (a) determine the appropriate transfer pricing method and (b) calculate the transfer price in the following three scenarios.
Fresno OY manufactures window units at a cost of $150 each and sells them to an unrelated distributor in the United States for $450 each. Fresno sells the same exact window units to Ceretony Inc., who then sells them to customers in Canada.

Ceretony Inc. manufactures t-shirts at a cost of $15 each and sells them to Fresno, who then sells the t-shirts to Norwegian customers at a retail price of $30. Fresno adds no significant changes/value to the shirts before sale. Norwegian clothing retailers normally earn a gross profit of 40 percent on sales price.

Fresno OY manufactures yo-yos at a cost of $20 each and sells them to Ceretony for distribution in Canada (sales price $25). Other Norwegian yo-yo manufacturers sell their products to unrelated customers and normally earn a gross profit equal to 20 percent of the production cost.

Suppose a grocery store is considering the purchase of a new self-checkout machine that will get customers through the checkout line faster than their current machine. Before he spends the money on the equipment, he wants to know how much faster the customers will check out compared to the current machine. The store manager recorded the checkout times, in seconds, for a randomly selected sample of checkouts from each machine. The summary statistics are provided in the table. Group Description Sample size Sample mean (min) Sample standard deviation (min) Standard error estimate (min) 1 old machine ?1=46 ?⎯⎯⎯1=123.4 ?1=25.8 SE1=3.80400 2 new machine ?2=43 ?⎯⎯⎯2=108.0 ?2=20.2 SE2=3.08047 df=84.45717 Compute the lower and upper limits of a 95% confidence interval to estimate the difference of the mean checkout times for all customers. Estimate the difference for the old machine minus the new machine, so that a positive result reflects faster checkout times with the new machine. Use the Satterthwaite approximate degrees of freedom, 84.45717. Give your answers precise to at least three decimal places.

Fresno OY, a Norwegian corporation, wholly owns Ceretony Inc., a subsidiary located and operating in Canada. Given the limited information provided, please (a) determine the appropriate transfer pricing method and (b) calculate the transfer price in the following three scenarios.

1. Fresno OY manufactures window units at a cost of $150 each and sells them to an unrelated distributor in the United States for $450 each. Fresno sells the same exact window units to Ceretony Inc., who then sells them to customers in Canada.

2. Ceretony Inc. manufactures t-shirts at a cost of $15 each and sells them to Fresno, who then sells the t-shirts to Norwegian customers at a retail price of $30. Fresno adds no significant changes/value to the shirts before sale. Norwegian clothing retailers normally earn a gross profit of 40 percent on sales price.

3. Fresno OY manufactures yo-yos at a cost of $20 each and sells them to Ceretony for distribution in Canada (sales price $25). Other Norwegian yo-yo manufacturers sell their products to unrelated customers and normally earn a gross profit equal to 20 percent of the production cost.

Jeffrey is a 25-year old full-time salaried AI engineer. He earned $85,000 in 2017, 10% more than he earned in the previous year in Calgary. Jeffrey moved to Montreal in 2017 to take up his new position at a cost of $7,000 (funded by a withdrawal from his TFSA). He has always contributed the maximum to his RRSP and TFSA. Jeffrey takes public transit to work at a cost of $960 a year and lives alone. His employer provides a medical plan at a premium of $1,200 a year. Other than the premium, Jeffrey’s only other medical cost in 2017 was a $5,000 dental bill. He pays the maximum contribution to Employment Insurance (EI), the Quebec Pension Plan (QPP) and the Quebec parental insurance plan (PPIP). He does not contribute to an employer pension plan.

                                                                            TABLE B

How much did Jeffrey contribute to his RRSP in 2017?

How much can Jeffrey contribute to his TFSA as of January 2018? Refer to Table B at the end of this case study.

Consider a commercial space with two tenants. An upscale restaurant and a live music venue. Currently, the restaurant is open serving customers until 10pm each night and the venue has music beginning at 9pm each night.

The live music causes a disturbance at the restaurant harming the restaurant owner's profit, so the owner is demands the music venue does not begin operating until 10pm. The venue owner counters that the restaurant should just close an hour early, at 9pm.  

The following are the hourly profits both firms will earn depending on various closing times.

• Scenario A: Both businesses are open between 9pm and 10pm: The restaurant earns $400 in profit and the venue earns $600 in profit between 9pm and 10pm.
• Scenario B: The venue does not open until 10pm: The restaurant would earn $1200 in profit between 9pm and 10pm, the venue earns no profit since it is closed during that time.
• Scenario C: The restaurant closes at 9pm: The restaurant earns no profits between 9pm and 10pm. The venues profit are not impacted by the restaurant, they still earn $600 profit in this scenario.

Assume no transaction costs.

a) Between the three scenarios, the efficient outcome is Scenario ["A", "B", or "C"] and the most inefficient outcome is Scenario ["A", "B", or "C"]      

b) Suppose the restaurant has the property rights, meaning if the restaurant loses profit due to the venue, the venue must pay the amount of the restaurant's lost profit. After any and all negotiations, does the Coase Theorem predict the venue will open at 9pm or 10pm?

c) Suppose the venue has the property rights, menaing the venue is not responsible for any profit lost by the restaurant. After any and all negotiations, does the Coase Theorem predict the venue will open at 9pm or 10pm?

d) Should, in any scenario, the restaurant pay the venue to stay closed until 10pm, what range of values represent an improvement to both tenants compared to the status quo? ["$200 - $400", "$400 - $600", "$600 - $800", "$800 - $1000", "$1000 - $1200"]      

#3 A regional automobile dealership sent out fliers to prospective customers indicating that they had already won one of three different​ prizes: an automobile valued at ​$21000​, a ​$125 gas​ card, or a ​$5 shopping card. To claim his or her​ prize, a prospective customer needed to present the flier at the​ dealership's showroom. The fine print on the back of the flier listed the probabilities of winning. The chance of winning the car was 1 out of 31,324​, the chance of winning the gas card was 1 out of 31,324 comma and the chance of winning the shopping card was 31,322 out of 31, 324. Complete parts​ (a) through​ (d).

a) how many flied do you think the automobile dealership sent out?

b) Using your answer to​ (a) and the probabilities listed on the​ flier, what is the expected value of the prize won by a prospective customer receiving a​ flier?

MEAN u= $

c) Using your answer to​ (a) and the probabilities listed on the​ flier, what is the standard deviation of the value of the prize won by a prospective customer receiving a​ flier?

SD o= $

d) do you think this is an effective promotion why or why not?

A. No. The promotion will not turn a profit regardless of how many customers redeeming fliers make a purchase.
B. Yes. The promotion will turn a profit if any of the customers redeeming fliers make a​ purchase, which is likely.
C. Yes. The promotion will turn a profit if the customers redeeming fliers make an average purchase greater than the expected value of the prize​ won, which is likely.
D. No. The promotion will only turn a profit if the customers redeeming fliers make an average purchase less than the expected value of the prize​ won, which is unlikely

This question is about a ski lift at a ski resort. Each seat can hold 4 people and seats depart once every 15 seconds. People arrive at random with an average rate of 15 people per minute. People are complaining that the lift is often busy and they have to wait for a free seat to take them up the mountain. You’re considering two options for ensuring faster service:

- Speeding up the motor and lift equipment at a cost of $190,000 so that seats that can hold 4 people depart once every 12 seconds;

- or installing wider seats that can hold 5 people each, at a cost of $270,000. (Seats depart once every 15 seconds.)

You decide to base your decision on the number of customers who arrive during the time you can serve them. You don’t want to have more than a 0.2 probability of more customers arriving than you can serve. For instance, with your current operation, you can serve 4 customers in 15 seconds, so you don’t want the probability of more than 4 customers arriving in 15 seconds to be greater than 20%.

Calculate the probabilities of more customers arriving than you can serve for each of the three scenarios:

(i) continue the current operation,

(ii) upgrade the motor and lift equipment, and

(iii) install wider seats.

Do you need to consider doing both (ii) and (iii) (so that seats holding 5 people depart once every 12 seconds)?

Which option should you choose?

1). Moonstruck sells fat-tire bicycles.

An average customer for Moonstruck buys a bicycles every five years and spends $500 every time they buy one. An average customer also spends $250 in parts and service.

An excellent customer buys 8 bicycles in their life time and spends $800 every time they buy one. An excellent customer spends $500 in parts and service very year.

The average profit margin for Moonstruck on its bicycles is 25%.

The average profit margin for Moonstruck on service and parts is 50%.

Moonstruck customers buy their first bicycle when they are 30 and ride bicycles until they are 80 years of age.

1. What is the Customer LifeTime Value of an average customer who is 30 years of age?
2. What is the Customer LifeTime Value of an excellent customer who is 45 years of age?
3. Would you advise Moonstruck to spend $1 million dollars on a marketing program that would turn 1,000 average customers age 50 into a 1,000 excellent customers?

2). Moonstruck has been tracking behavior of its customers. Below is a table showing three of their customers. Specify how you would recommend Moonstruck to deal with each of them.

1. DESHAIES:
2. YANG:
3. PEREZ:

3). Moonstruck is interested to maximize the Customer Life Time Value. What are the variables that management can manipulate to try to maximize CLTV, i.e., make CLTV as large as possible?

4) What are the applications of Market Basket Analysis? Give two examples.

a) Derive the short-term cost function from the production function.
b) What is the relationship between cost and supply function?
c) Show that when profit is maximized, a company chooses the production quantity, where marginal revenue and marginal cost are the same.
d) Show the market result in the case of a monopoly with deadweight loss that goes with it.