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DrexelBoard wants to start a hoverboard sharing service in Philadelphia (much like Zipcar, only with hoverboards instead of cars). There are two types of potential customers: young professionals, each of whom has annual demand that is given by Qprof = 50 – 2p, and students, each of whom has annual demand that is given by Qstudent = 25 – p. In each case, Q is measured in ten minute increments of hoverboard rental time and p is the price in dollars. DrexelBoard’s cost function is 5Q, where Q = Qprof + Qstudent. Assume that there is only one young professional and one student in the market (the results you will find would generalize to any number of users, as long as they existed in equal proportions). (a) Suppose that DrexelBoard was interested in instituting a two-part tariff only for the young professional in which it charges an annual membership fee for the right to purchase hoverboard rental time from the company as well as a usage fee for each ten minute rental purchased. What would be the profit-maximizing membership fee and the usage fee to charge the young professional? (b) What would be DrexelBoard’s economic profits if it only served the young professional using the two-part tariff you solved for in part (a)? (c) Show mathematically and explain in words why the student would not be willing to pay the membership and usage fee you solved for in part (a). (d) Solve for the profit-maximizing two-part tariff (i.e., the membership fee and usage fee) that both the student and the young professional would be willing to purchase. Round your answers to the nearest cent. (e) Putting both the young professional’s and the student’s demand curves in the same graph (with price on the y-axis and quantity on the x-axis), illustrate the two-part tariff you derived in part (d). (f) What are DrexelBoard’s economic profits with the two-part tariff you derived in part (d)? Comparing these profits to those DrexelBoard earned from only serving the young professional (derived in part (b)), should DrexelBoard price to sell to both consumers or just to the young professional?
Suppose that the demand for orange increases. Carefully explain how the rationing function of price will restore market equilibrium.
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Which is more economical, a plant with a payroll of $400 a week, with $100 of overhead, and with an output of 100 units per week, or a plant with a payroll of $80,000 a week, an overhead of $100,000 a week, and an output of 50,000 units per week? How..
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Tom gains utility from consumption C and leisure L. The most leisure she can consume in any given week is 112 hours. His wage is $20. His utility function is U(C,L) = C^3/4*L^1/4. Tom receives 640 each week from her great-grandmother. What is the mar..
As a currency appreciates:
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The Atlanta Hawks owner Tony Ressler decides that by spending and additional $10 million, he anticipates the team will finish one place higher this season. If true does this mean he can raise the team’s place in the standings by one place for each $1..
This would be ideal because he would have the same number of pretzels as he would soda leaving no money left to spend.
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q1. sallys firm produces granola bars with a fixed cost of 10 this cost is already sunk. her variable cost function is
The nation of Leisureland can produce two goods, bicycles and bowling balls. The western region of Leisureland can, if it devotes all its resources to bicycle production, produce 100 bicycles per month. What is the opportunity cost of producing an ad..
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