Price and cost (dollars per item) 14 12 10 8 6 4 2 MR 0 5 10 15 MC = ATC 25 20 Quantity (millions) The figure above shows the demand for items from a warehouse club. All of the people who shop at the warehouse club have the same demand. If the managers set a single price, so that all customers pay the same price for every item they buy, the firm makes an economic profit of and if the managers use two-part pricing, the firm makes an economic profit of $40 million; $60 million $60 million; $80 million $0; $80 million $40 million; $80 million
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- 12 Jim's Camera shop sells two high-end cameras, the Sky Eagle and Horizon. The demands and selling prices for these two cameras are as follows. Ds = demand for the Sky Eagle Ps= selling price of the Sky Eagle DH = demand for the Horizon PH = selling price of the Horizon = 223 - 0.60P + 0.35PH DH=270+ 0.10P - 0.64PH Revenue Ds The store wishes to determine the selling price that maximizes revenue for these two products. Develop the revenue function R (in terms of Ps and PH only) for these two models, and find the revenue maximizing prices (in dollars). (Round your answers to two decimal places.) Price for Sky Eagle Price for Horizon Optimal revenue R = PS = $| PH = $ R = $Q.5 A firm is making two products A & B. Each unit of A incurs a cost of production to the tune of $150 and that of B incurs a cost of $200. Product A earns a profit of $15/unit and B gets $20/unit. The estimated monthly demand of both A & B is at maximum 500 units. Monthly production budget is set at $50,000.How many units of A & B should the firm make in order to maximize profit. Conduct sensitivity analysis and answer the following questions: 1. State the optimal solution. 2. What is the objective function value? 3. Find out the range of profit for A in the objective function for which the above solution remains optimal. 4. Which constraint/s is/are binding? 5. Interpret the shadow price for production budget.Aruna owns Pottery Plus, a small firm that produces terra cotta pots for sale in the Edmonton area. The graph below shows Aruna's demand curve. Price ($) 40 36 32 28 24 20 16 12 8 4 0 4 8 12 16 20 24 28 32 36 40 Quantity per period
- Jackistheowneroftheonlylocalbarinasmalltown.Hesellswhiskeyin one-ounce glasses. For simplicity, let’s assume it doesn’t cost Jack anything to run his business. There are two customers, Adam and Burt who are twin brothers. Adam’s demand function is yA = 16 – 2p, and Burt’s demand function is yB = 8 – p (price is measured in dollars and quantity is measured by ounces). Jack knows their demand functions, but the problem is that he cannot tell them apart since they look exactly the same to him. To increase his profits, Jack offers the following two options that his customers can choose from: (1) You can pay $T1 up front and drink as much as you want; or (2) Pay $T2 up front and the price per ounce of whiskey will be $p. 1.a If p = 4, what is the maximal T2 that Jack can charge so that Burt is willing to come to the bar? 1.b What is the maximal T1 that Jack can charge so that Adam will choose the first pricing option?Draw the diagrams for MRS for perfect substitutes, perfectcompliments and close substitutesPoornima's Performance Pizza is a small restaurant in San Francisco that sells gluten-free pizzas. Poornima's very tiny kitchen has barely enough room for the three ovens in which her workers bake the pizzas. Poornima signed a lease obligating her to pay the rent for the three ovens for the next year. Because of this, and because Poornima's kitchen cannot fit more than three ovens, Poornima cannot change the number of ovens she uses in her production of pizzas in the short run. However, Poornima's decision regarding how many workers to use can vary from week to week because her workers tend to be students. Each Monday, Poornima lets them know how many workers she needs for each day of the week. In the short run, these workers are inputs, and the ovens are inputs. Poornima's daily production schedule is presented in the following table. Fill in the blanks to complete the Marginal Product of Labor column for each worker. Labor Output Marginal Product of Labor…
- Harriet McNeil, proprietor of McNeil's Auto Mall, believes that it is good business for her automobile dealership to have more customers on the lot than can be served, as she believes this creates an impression that demand for the automobiles on her lot is high. However, she also understands that if there are far more customers on the lot than can be served by her salespeople, her dealership may lose sales to customers who become frustrated and leave without making a purchase. Ms. McNeil is primarily concerned about the staffing of salespeople on her lot on Saturday mornings (8:00 a.m. to noon), which are the busiest time of the week for McNeil's Auto Mall. On Saturday mornings, an average of 6.8 customers arrive per hour. The customers arrive randomly at a constant rate throughout the morning, and a salesperson spends an average of one hour with a customer. Ms. McNeil's experience has led her to conclude that if there are two more customers on her lot than can be served at any time…2. The demand curve facing a competitive firm The following graph illustrates the market for large moving trucks in Eugene, OR, during Oregon's fall move-in week. PRICE (Dollars per large truck) 400 360 320 Demand 280 240 200 8 160 120 80 40 0 1 3 4 5 6 7 8 QUANTITY (Hundreds of large trucks) 2 Supply + 9 10 (2)The blue curve on the following graph represents the demand curve facing a firm that can set its own prices. Use the graph input tool to help you answer the following questions. You will not be scored on any changes you make to this graph. Note: Once you enter a value in a white field, the graph and any corresponding amounts in each grey field will change accordingly. PRICE (Dollars per unit) 100 TOTAL REVENUE (Dollars) 90 80 20 10 0 1250 1125 1000 875 750 625 500 On the previous graph, change the number found in the Quantity Demanded field to determine the prices that correspond to the production of 0, 10, 20, 25, 30, 40, or 50 units of output. Calculate the total revenue for each of these production levels. Then, on the following graph, use the green points (triangle symbol) to plot the results. 375 250 125 + 0 0 0 Demand 5 10 15 20 25 30 35 40 45 50 QUANTITY (Units) + 5 20 10 15 25 30 35 QUANTITY (Number of units) 40 Graph Input Tool Market for Goods 45 50 Quantity Demanded (Units)…
- Explain the methods used toallocate the integratedmarketing communications(IMC) budget.Based on Zangwill (1992). Murray Manufacturing runs a day shift and a night shift. Regardless of the number of units produced, the only production cost during a shift is a setup cost. It costs $8000 to run the day shift and $4500 to run the night shift. Demand for the next two days is as follows: day 1, 2000; night 1, 3000; day 2, 2000; night 2, 3000. It costs $1 per unit to hold a unit in inventory for a shift. a. Determine a production schedule that minimizes the sum of setup and inventory costs. All demand must be met on time. (Note: Not all shifts have to be run.) b. After listening to a seminar on the virtues of the Japanese theory of production, Murray has cut the setup cost of its day shift to $1000 per shift and the setup cost of its night shift to $3500 per shift. Now determine a production schedule that minimizes the sum of setup and inventory costs. All demand must be met on time. Show that the decrease in setup costs has actually raised the average inventory level. Is this…What is the profit maximizing level of output and how much daily profit will the producer below earn if the price of pizza is $0.50 per slice? See the attachment for graph.