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Assume that a local bank sells two services-- checking accounts and ATM card services. Mr. Donethat is willing to pay $8 a month for the bank to service his checking account, and $10 a month for unlimited use of his ATM card. Ms. Beenthere wants to pay only $5 for a checking account, but will pay $15 for unlimited use of her ATM card. To keep this example simple, assume that the bank can provide each of these services at zero marginal cost. SHOW WORK. A) If the bank is unable to use tying, what is the profit-maximizing price to charge for a checking account? B) If the bank is unable to use tying, what is the profit-maximizing price to charge for unlimited use of an ATM card? C) If the bank is able to use trying to price checking account and ATM services, what is the profit-maximizing price to charge for the "tried good? D) How much additional profit does the bank make when it switches to use of a trying strategy to price checking accounts and ATM services? E) How much total surplus is generated from using trying to price the checking account and ATM services? How does that compare to the nontied pricing strategy? Which strategy has the largest deadweight loss?
For the Cobb-Douglas production function in Problem 6.7, in can be shown (using calculus) that. If the Cobb-Douglas exhibits constant returns to scale (a+b=1), show that Both marginal productivities are diminishing.
Efficiency refers to whether a market outcome is fair, whereas equality refers to whether the maximum amount of output was produced from a given number of inputs. When a good is taxed, the tax revenue collected by the government equals the decrease i..
Suppose that there is a fixed number of workers. Each worker is at a certain instance either employed or unemployed. The average duration of a period of unemployment is Du=10 months, and the average duration of a period of employment is De = 40 month..
Why do some companies spend a lot of money for advertising? What does it say about a the market structure the company is in when they advertise a lot or a little?
Before the shipping container, cargo had to be removed from a ship piece by piece, a very time-consuming process requiring a lot of dock workers to accomplish. But, if automation increased wages, which of the following best explains why the workers r..
Currently a government budget is balanced. The marginal propensity to consume is 0.75. The government has determined that each additional $10 billion in new government debt it issues to finance a budget deficit pushes up the market interest by 0.20 p..
If they close, then they only have the fixed costs. On a graph, we would have to compare the price with the average variable cost. What decisions need to be taken into consideration to determine if the business should remain open or close down
Net social benefits are maximized when:
An asset used in a three-year project falls in the five-year MACRS class for tax purposes. The asset has an acquisition cost of $8,700,000 and will be sold for $1,910,000 at the end of the project. If the tax rate is 34 percent, what is the after tax..
Describe the business and provide a summary of the business analytics they could apply to their business in multiple scenarios.
Use supply and demand curves to analyze increase/decrease for the following scenarios? i) shift ii) movement iii) equilibrium price iv) equilibrium quantity. Coffee prices soar due to a shortage of coffee beans. Market: Donuts. Prices for next year a..
In order to be a successful price discriminator, a provider must have a degree of market power (depicted by a downward-sloping demand curve) and meet what other condition(s)? Prospective customers must be categorized according to willingness-to-pay.
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