The firm produces at MR=MC

MR=50-2Q ......... An MR curve is double sloped than an inverse linear demand curve

MC=10

Since MR=MC, 50-2Q=10

2Q=40

Q=20

P=50-20=30

The monopoly price is 30

MC/MR will be the same for students and general public

Pp[1+E/E]=MC

$360[1-2/-2]=$180=MC for general public

This, $180=Ps[1-3/-3]=$270=Price for students

Economies of Scope and cost complementaries (which means it is cheaper for a company to produce two or more complementary products than solely one product).

Limited Capacity; if there was endless capacity, there would be no need for peak-load pricing.

Beat or pay; In this strategy, if the firm is not able to provide the best rates in the market then it compensates the customer according to their condition of payment received in such cases it develops Brand Loyalty among the customers.

The demand function is given as:

Q = 20 - 4P

The inverse demand function is:

P = 5 - Q/4

The total revenue is calculated by multiplying the price and quantity. So,

TR = PQ = 5Q - Q²/4

MR = 5 - 0.5Q

The cost function is given as:

C = 4Q

The marginal cost is calculated below:

MC = 4

The profit is maximized when the marginal revenue is equal to the marginal cost.

5 - 0.5Q = 4

0.5Q = 1

Q = 2

Putting Q = 2 in the inverse demand function:

P = 5 - 2/4 = 5 - 0.5 = 4.5

So, the optimal per-unit price is $4.5 x 4 = 18

Frequent flyer programs; gives customers incentive to return

Charge Type A consumers $50 and Type B consumers $75.Since the firm is able to perfectly price discriminate so in order to maximize profit the firm should charge each group of consumers according to their willingness to pay (marginal cost of producing is zero for the firm and has no competition). Here group A of consumers are willing to pay $50 so they should be charged $50, while group B of consumers are willing to pay $75 so they should be charged $75.

The average consumer at a firm with market power has an inverse demand function of P = 10 − Q. The firm's cost function is C = 2Q. If the firm engages in two-part pricing, what is the optimal price to charge a consumer for each unit purchased?

a. $0

b. $1

c. $4

d. None of the answers are correct.

None of these answers are correct; $2 is the optimal price because MC=dC/dQ=2 and in two-part pricing per unit price is equal to MC.

[E/1-E]MC=P so,

[-3/1-3]2=$3

If P=38-Q, then MR=38-2Q

Since MC=$8 and MC=MR at equilibrium,

38-2Q=8 and Q=15

Profits = Revenue - Costs

Revenue= PQ, or (38-15)(15) = 345

Costs= MC*Q or 8(15) = 120

345-120 = $225 profit

In two part pricing, firms will produce where P=MC, MC does not equal MR in two-part pricing strategy.

Thus, P=5-.25Q = 1

Q= 16

Consumer surplus = height {y-intercept-MC} x base {Q} x 1/2

(5-1)(16)(1/2)=$32

Firms will often implement randomized pricing in an attempt to reduce:

a. only competitor price information.

b. only consumer price information.

c. both customer and competitor information about price.

d. Randomized pricing does not affect information available to consumers or competitors.

Randomized pricing reduces both customer and competitor information about price

Suppose that the demand for a monopolist's product is estimated to be Qd = 100 − 2P and its total costs are C(Q) = 10Q. Under first-degree price discrimination, the optimal price(s), number of total units exchanged, profit, and consumer surplus are:

a. P = $30; Q = 40, Π = $800; CS = $400.

b. 10 ≤ P ≤ 100; Q = 80; Π = $1,600; CS = $1,600.

c. 10 ≤ P ≤ 50*;* Q = 80, Π = $1,600; CS = $0.

d. P = $30; Q = 40, Π = $600; CS = $0.

c. 10 ≤ P ≤ 50*;* Q = 80, Π = $1,600; CS = $0.

We can eliminate a and b immediately because under first-degree price discrimination, all consumer surplus is extracted and is equal to 0.

Price is equal to Marginal Cost

P=50-.5Q=MC=10

50-5Q=10

Q=80, so we can eliminate option a.

P=$10 so c is the only option that is possible

To engage in first-degree price discrimination, a firm must:

a. be able to set P > MC.

b. know each consumer's maximum willingness to pay.

c. prevent low-value consumers from reselling to high-value consumers.

d. All of the answers are correct.

All of the answers are correct.;

a. as long as P=MC, a firm will make profit

b. to first-degree price discriminate, a firm needs to know what to charge each customer

c. if low-value customers resell to high-value customers, price discrimination will not work because the company will "lose" high-value customers.

A firm should produce that level of output where marginal cost is equal to marginal revenue(MC=MR). This is the profit maximizing output. The price charged at this level of output is determined by the corresponding point on the demand curve.

From the above diagram we can see that, high peak time demand curve and marginal revenue curve is given by DHigh and MRHigh respectively. The firm will produce that level of output where MC=MR. The MC curve intersects the MRHigh curve at output Q3. This is the profit maximizing output during high peak times. The price charged at this level of output will be determined by the corresponding point on the demand curve at this level of output. The price charged corresponding to DHigh curve at output of Q3 is P4. Hence the price charged during high peak times is P4.

$8/unit; P=[NEM/1+NEM]MC where N= number of firms and EM is market elasticity.

P=[4(-2)/1-8]*7= $8

Which of the following pricing strategies is NOT used in markets characterized by intense price competition?

a. Price matching

b. Transfer pricing

c. Randomized pricing

d. Inducing brand loyalty

Transfer Pricing; transfer pricing is used in markets with special cost and demand structures.

a. Price matching is a way to keep customers away from rivals

c. Randomized pricing is a way to keep pricing information away from rival and customers

d. Brand loyalty is a way to keep customers away from rivals

5 times marginal cost; P=[EF/1+EF]MC

P=[-1.25/.25]MC

P=5(MC)