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Food For Life makes health foods for active, outdoor people. Their three basic products are whey powder, a high protein strength bar, and a meal additive that has the taste and consistency of sawdust. Research shows that consumers fall into two types (A and B), and these are described in the table below by their reservation prices for the products. Each consumer will demand no more than one unit of any product at their reservation price. The consumers will value a bundle of the products at the sum of the constituent reservation prices. Each product costs 3 to produce. A bundle of all three products costs 9 to produce. Food for Life does not price discriminate. Reservation Prices Consumer Whey Strength Sawdust Bundle A 10 16 2 B 3 10 13 There is an equal number of each consumer type (for simplicity, one of each type). Only bundles of all three products need to be considered. Best Separate Price Strategy Customer Price per Unit Cost per unit Profit per unit Number of units Profit A B A B A B Best Pure Bundling Strategy Customer Price per Bundle Cost per Bundle Profit per Bundle Number of units Profit A B Best Mixed Bundling Strategy Customer Price per Bundle Cost per Bundle Profit per Bundle Number of units Profit Customer Price per Unit Cost per unit Profit per unit Number of units Profit What pricing (profit- maximizing) strategy ( and mixed bundling) would you recommend to Food For Life? Why?
Sharp rises in the cost of milk, grain, and fresh fruits and vegetables are hitting cafeterias across the country, forcing cash-strapped schools to raise prices or serve more economical dishes. How many servings of grapes can the school afford each d..
Suppose a single firm produces all of the output in a contestable market. The market inverse demand function is P = 250 -5Q, and the firm’s cost function is C(Q) = 6Q. Determine the firm’s equilibrium price and corresponding profits.
The government wants to stimulate the economy. By how much will aggregate demand at current prices shift initially before multiplier effects.
A consumer has $120 and faces prices px =$5 and py=$10. Draw its budget set. Suppose its income were to fall to $60. Draw the new budget set. Assume income is again $120, but the prices double to $10 and $20, respectively. Draw the new budget set and..
Assume that the government plans to introduce a tax cut next year. There are two groups of economists advising the administration on this issue. One group advocates business and investment tax cuts for firms and high income individuals. Take a positi..
Retail sales taxes are used at the state and local level to finance general fund expenditures. In other words, the tax revenue collected via the sales tax is not tied directly tied to benefits received by each taxpayer. Retail sales tax fair?
Kelli likes to bake cookies and doesn't care whether she uses corn or safflower oil in her recipes. To her, they provide the same function and the same taste in her cakes and cookies. What do Kelli's indifference curves look like for corn oil and saf..
Illustrate what potential conflicts of interest could arise in a management buyout in which the investment bank is also likely to be an investor.
In a market society, collective behavior determines the levels of incentives (or prices).' Explain, using diagram, the way in which prices are achieved in the market. In the diagram also show the consumer and producer surplus. Using the concept of co..
What is protectionism? Explain what trade protectionism is, example: health and safety regulation. What are the argument favor of trade protectionism and what are some opposite or drawback of this.
Which of the following are true regarding currency swaps?
Marcus’s utility function is U(X, Y) = (X + 2) (Y + 1). a. Write an equation for the indifference curve that goes through the point (2, 8). Graph the indifference curve for U=36 c. Let Px=Py=1 and m=11. Draw Marcus’s budget constraint in the graph fr..
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