Market imperfection associated with negative externalities
Course:- Macroeconomics
Reference No.:- EM1364

Assignment Help
Expertsmind Rated 4.9 / 5 based on 47215 reviews.
Review Site
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
Jane has £500 a week to spend on food and clothing. The price of food is £10 and the price of clothing is £25. Which of the following pairs of food and clothing are in Jane'
What method is used to ration goods in a market economy? How does this rationing method influence the incentive of individuals to supply goods, services, and resources to othe
The concepts of demand elasticities, analysis of market structures, pricing, and barriers to entry. Discuss how this type of knowledge can provide a better understanding of ho
In an integrated world financial market, a financial crisis in a country can be quickly transmitted to other countries, causing a global crisis. What kind of measures would yo
Your firm operates three plants. The cost functions vary across the three plants. Plant A: Marginal Cost = 6Q Average Variable Cost = 3Q Average Fixed Cost =1000/Q Plant B: H
Suppose a soft-drink firm is grappling with the decision about whether or not to introduce to the market a new carbonated beverage with 25 percent real fruit juice. Elucidat
Suppose Gillette makes razors and blades. The marginal cost of producing blades is 1 and assume the marginal cost of producing razors is 5. Gillete has a monopoly in the raz
The “net exports effect” is the impact on a country’s total spending caused by an inverse relationship between the price level and the net exports of an economy. Using this pr