03 Jun Question Please answer the following short answer questions (5 pts each):
Question
Please answer the following short answer questions (5 pts each):
18. As a budding entrepreneur, you have purchased a small bagel shop. You have
engaged in a market study to categorize your customers willingness to pay for a meal
(coffee+bagel) into 8 equal sized groups: ($5.00, $4.50, $4.00, $3.50, $3.00, $2.50,
$2.00, $1.50). All of your costs are fixed except labor and materials, which cost $2.25
per meal sold.
a. What price should you charge for a meal? Does your answer depend on the total
number of consumers?
b. Suppose your market research tells you that the four lowest value groups are all
students. Should you offer a student discount? If so, how much?
19. Concert price have increased coincidentally with illegal downloading of music off
the internet. What is the causal link?
20. VetPharm has historically produced and sold drugs for animals; however, one of its
products developed for animal use has recently been approved for a similar use in
humans. Market research has revealed that that at the current per dose price, the
elasticity of demand on the part of animal owners is -2.0. The research also estimates
that at this price the elasticity of demand for human use would be -.2. The current price
is $5.00 per dose. If the MC of production is $1, what should the company do?
a. reduce animal price; reduce human price.
b. raise animal price; raise human price.
c. reduce animal price; raise human price.
d. raise animal price; reduce human price.
21. Ivan loves classical music, and his favorite composer wrote nine
symphonies. Ivan just happens to the 9 symphonies in exactly the order in
which they were written. The table below shows the values that Ivan places on
having these symphonies which he does not currently yet own:
Rank Total Personal Value
1_______________19 2_______________36 3_______________51
4_______________64 5_______________75 6_______________84
7_______________91 8_______________96 9_______________99 You can interpret
the above to mean, for example, that Ivan values her favorite Symphony at $19, and that
the total value of the first Symphony plus Symphony # 2 (his second favorite) is $36,
etc. If the symphonies were sold individually on CDs – one symphony per disc – and the
price per CD was $10.00, how many CDs would he buy?
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