Friday
April 18, 2014

Homework Help: managerial economics

Posted by matherik on Monday, September 8, 2008 at 1:59am.

A firm offers two differentiated products, X and Y and faces two types of consumers, types A and B. There are equal numbers of each type of consumers íV so, for simplicity, assume there is just one of each type. The valuations of the two types of customers of the two products are summarized in the table below. Assume (for simplicity) that the marginal cost of manufacture of X and Y is identical, constant and equal to zero:

Customers
& Products X-cheapticket Y-VIPticket
Type A 10 15
Type B 12 25

(a)If the firm offers good X for a price of 11 and good Y for a price of 26, which (if any) product will each consumer type buy (if she only wants to buy one)?

(b)If the firm offers good X for a price of 9 and good Y for a price of 24, which (if any) product will each consumer type buy (if she only wants to buy one)?

(c)Calculate the profits earned by the firm on each of the set of prices in parts (a) íV (b). Can you propose prices for X and Y to achieve higher profits?

(d)How does the consumer surplus for Type B on good X limit the price that can be set for good Y (to get Type B to select good Y)? Is there a positive or negative relationship between the price on good X and the price that can be charged on good Y? Why (if we want both consumers to purchase a good) does this imply that the price on good X should be set leaving Type A with zero consumer surplus?

Answer this Question

First Name:
School Subject:
Answer:

Related Questions

managerial economics - A firm offers two differentiated products, X and Y and ...
managerial economics - A firm offers two differentiated products, X and Y and ...
Economics - You are the manager of a firm that sells CD players and DVD players...
ECONOMICS - Imagine a firm that hires two types of workers: some with computer ...
Managerial Economics - Suppose the two rival office supply companies Office ...
Managerial Economics - Suppose the two rival office supply companies Office ...
managerial economics - Suppose the two rival office supply companies Office ...
statistic - . A company is considering installing new machines to assemble its ...
science - A pyramid of numbers demonstrates that a community has a) producers ...
Science - Grass, Birch, Balsam Fir, Fox, Wolve, Moose, Snowshoe hare, Ticks, ...

Search
Members