Market imperfection associated with negative externalities
Course:- Macroeconomics
Reference No.:- EM1361

Assignment Help
Assignment Help >> Macroeconomics

Question:The airport branch of a car rental company maintains a fleet of 50 SUVs. The interarrival time between requests for an SUV is 2.4 hours, on average, with a standard deviation of 2.4 hours. There is no indication of a systematic arrival pattern over the course of a day. Assume that, if all SUVs are rented, customers are willing to wait until there is an SUV available. An SUV is rented, on average, for 3 days, with a standard deviation of 1 day.

a. What is the average number of SUVs parked in the company's lot?

 b. Through a marketing survey, the company has discovered that if it reduces its daily rental price of $80 by $25, the average demand would increase to 12 rental requests per day and the average rental duration will become 4 days. Assuming that the std. dev. values stay unchanged, should this company adopt this new pricing policy? Provide an analysis!

c. What is the average time a customer has to wait to rent an SUV? Please use the initial parameters rather than the information in (b).

d. How would the waiting time change if the company decides to limit all SUV rentals to exactly 4 days? Assume that if such a restriction is imposed, the average interarrival time will increase to 3 hours, with the standard deviation changing to 3 hours.

Put your comment

Ask Question & Get Answers from Experts
Browse some more (Macroeconomics) Materials
Suppose that the Fisher hypothesis holds for an economy that an expected real interest rate of 2 percent. For each of the expected inflation rates of 0, 2, 4, 6, and 8 percent
Suppose there is a policy debate regarding the United States' imposing trade restrictions on imported steel rods: Domestic producers of steel rods send a lobbyist to the U.S
Indicate better measures and suggest how one of these overcomes these limitations as an effective measure. Requirement : The essay should write step by step, which is writing
Identify trends or other patterns in inflation within the an economy of your choice over the last five years using quarterly data from the Central Bank or other Government bas
You are the manager of a firm that competes against four other firms by bidding for government contracts. While you believe your products is better than the competition, the
What is the major problem in achieving an efficient use of the world's water If there were a global market in water, like there is in oil, how do you think the market would
The prices of outstanding bonds change whenever the going rate of interest changes. In general, short term interest rages are more volatile than long term interest rates.
Calculate the changes in inflation rates, unemployment rates and the RGDP growth rates for the years from Year 2007 through 2015 and show them in a new column next to each o