Question Description
Problem 1: Using the Marginal Approach
Suppose your company runs a shuttle business of a hotel to and from the local airport. The costs for different customer loads are: 1 customer: $30 2 customers: $32 3 customers: $35 4 customers: $38 5 customers: $42 6 customers: $48 7 customers: $57 8 customers: $68.
1. What are your marginal costs for each customer load level? (Chart)
2. If you are compensated $10 per ride, what customer load would you choose? (Essay)
Problem 2: Elasticity and Pricing
Suppose the number of firms you compete with has recently increased. You estimated that as a result of the increased competition, the demand elasticity has increased from –2 to –3, i.e., you face more elastic demand. You are currently charging $10 for your product. What is the price that you should charge, if demand elasticity is -3?
(Essay)
Problem 3: Price Discrimination
An amusement park, whose customer set is made up of two markets, adults and children, has developed demand schedules as follows:
Price ($) Quantity Adults Children 5 15 20 6 14 18 7 13 16 8 12 14 9 11 12 10 10 10 11 9 8 12 8 6 13 7 4 14 6 2
Problem 1: Using the Marginal ApproachSuppose your company runs a shuttle business of a hotel to and from the local airport. The costs for different customer loads are: 1 customer: $30 2 customers: $32 3 customers: $35 4 customers: $38 5 customers: $42 6 customers: $48 7 customers: $57 8 customers: $68.1. What are your marginal costs for each customer load level? (Chart)2. If you are compensated $10 per ride, what customer load would you choose? (Essay)Problem 2: Elasticity and PricingSuppose the number of firms you compete with has recently increased. You estimated that as a result of the increased competition, the demand elasticity has increased from –2 to –3, i.e., you face more elastic demand. You are currently charging $10 for your product. What is the price that you should charge, if demand elasticity is -3?(Essay)Problem 3: Price DiscriminationAn amusement park, whose customer set is made up of two markets, adults and children, has developed demand schedules as follows:Price ($) Quantity Adults Children 5 15 20 6 14 18 7 13 16 8 12 14 9 11 12 10 10 10 11 9 8 12 8 6 13 7 4 14 6 2
