A+Solution: MBAA 523 Problem Set 6

profileAdams Nigel
 (Not rated)
 (Not rated)
Chat

MBAA 523

Problem Set 6 

1.    You compete with many firms offering similar products (monopolistic competition). An economic consulting firm has estimated the own-price elasticity for your most profitable product is -1.50. Your marginal cost is constant at $75 across most of your production volume capability. What price will maximize profits?  Show the computation.

 

2.    Define the 3 types of price discrimination and explain why 1st degree discrimination is very difficult to practice. Provide 1 example where a form of 1st degree discrimination is practiced.

 

3.    Complete and label the diagram showing the numbers of seats sold and price for leisure and business passengers. Answer the following questions:

a.    If the price of fuel increases modestly, will fares increase?

b.    Are all seats sold?  If not, wouldn’t the airline make more money by selling more seats at a lower price?

4.    Explain the conditions necessary for a firm to practice 3rd degree price discrimination and using airline conditions as examples.

 

5.    Wall-Mart offers to match the price of any competitor. Why is this guarantee not necessarily a benefit to consumers?

    • 9 years ago
    Perfect Solution
    NOT RATED

    Purchase the answer to view it

    blurred-text
    • attachment
      4e_4e_4e_007860786.docx