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ECO 500 CHAPTER 11 HOMEWORK

ECO 500 CHAPTER 11 HOMEWORK

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Author: Christine Farr
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Problem 11-04 (Algo)
You are the manager of a monopoly that sells a product to two groups of consumers in different parts of the country. Group 1’s elasticity of demand is -6, while group 2’s is -4. Your marginal cost of producing the product is $50.
a. Determine your optimal markups and prices under third-degree price discrimination.  
b. Which of the following are necessary conditions for third-degree price discrimination to enhance profits.
 
Problem 11-06 (Algo)
A monopoly is considering selling several units of a homogeneous product as a single package. A typical consumer’s demand for the product is Qd = 90 - 0.5P, and the marginal cost of production is $110.
Problem 11-11 (Algo)
You are the owner of a local Honda dealership. Unlike other dealerships in the area, you take pride in your “No Haggle” sales policy. Last year, your dealership earned record profits of $1.3 million. In your market, you compete against two other dealers, and the market-level price elasticity of demand for midsized Honda automobiles is -1.7. In each of the last five years, your dealership has sold more midsized automobiles than any other Honda dealership in the nation. This entitled your dealership to an additional 30 percent off the manufacturer’s suggested retail price (MSRP) in each year. Taking this into account, your marginal cost of a midsized automobile is $13,000
 
Problem 11-14
According to the Cahner’s In-Stat Group, the number of worldwide wireless phone subscribers will soon reach the 1 billion mark. In the United States alone, the number of wireless subscribers is projected to grow by almost 17 million subscribers per year for the next five years. Contributing to the extensive growth are lower prices, larger geographic coverage, prepaid services, and Internet enabled phones. While the actual cost of a basic wireless phone is about $150, most wireless carriers offer their customers a “free” phone with a one-year wireless service agreement.


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