IV. Slim City is a town resided by slim people, with no health club in town. LA Fatness has estimated that the annual demand for their Fatness Club in this town to be Q = 160 - P. Every Club member has a marginal cost of $40, and the annual fixed cost of the business is $500 (assume a linear cost function). 1. LA Fatness starts the first Fatness Club in town. What is the optimum price and membership quantity? 2. What is the profit of the business at the optimum solution? 3- Observing the potential for profit, Twenty-Eight-Hours Club (T-E-H Club), a competitor of the LA Fatness, enters the market. T-E-H Club has the same marginal and fixed cost structure as of the LA Fatness and provides a homogeneous service. What is the optimum quantity for the T-E-H Club?
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- You are the manager of a monopolist that produces women shoes and faces a random marginal cost. The demand for women shoes is O = 1000 - 0.1P Marginal cost can be constant at either $60 with a probability of 50% or $40 with a probability of probability of 50%. Draw a graph and plot the demand for shoes. Derive the marginal revenue curve and plot it on the graph. Find the price and output that maximize profits. Find the firm's profits.Andrea's Day Spa began to offer a relaxing aromatherapy treatment. The firm asks you how much to charge to maximize profits. The demand curve for the treatments is given by the first two columns in the following table; its total costs are given in the third column. Answer the following question accordingly. Price QuantityTC $25.00 $100 $24.00 10 $250 $23.00 20 $420 $22.00 30 $600 $21.00 40 $780 $20.00 50 $970 $19.00 60 $1,170 The profit maximizing price in the above table is: Select one: a. $21 b. $24 c. $22 d. $25 ооооAndrea's Day Spa began to offer a relaxing aromatherapy treatment. The firm asks you how much to charge to maximize profits. The demand curve for the treatments is given by the first two columns in the following table; its total costs are given in the third column. Answer the following question accordingly. Price QuantityTC $25.00 $100 $24.00 10 $250 $23.00 20 $420 $22.00 30 $600 $21.00 40 $780 $20.00 50 $970 $19.00 60 $1,170 Total fixed costs in the above table is: Select one: a. $130 b. $10 c. $100 d. Zero
- Ms. Aura is a psychic. The demand for her services is given by Q = 2,000 - 10P, where Q is the number of one-hour sessions per year and P is the price of each session. Her marginal revenue is MR = 200 - 0.2 Q. Ms. Aura’s operation has no fixed costs, but she incurs a cost of $150 per session (going to the client’s house).a. What is Ms. Aura’s yearly profit?b. Suppose Ms. Aura becomes famous after appearing on the Psychic Network. The new demand for her services is Q = 2,500 - 5P. Her new marginal revenue is MR = 500 - 0.4 Q. What is her profit now?c. Advances in telecommunications and information technology revolutionize the way Ms. Aura does business. She begins to use the Internet to find all relevant information about clients and meets many clients through teleconferencing. The new technology introduces an annual fixed cost of $1,000, but the marginal cost is only $20 per session. What is Ms. Aura’s profit? Assume the demand curve is still given by Q = 2,500 - 5P.d. Summarize the…Andrea's Day Spa began to offer a relaxing aromatherapy treatment. The firm asks you how much to charge to maximize profits. The demand curve for the treatments is given by the first two columns in the following table; its total costs are given in the third column. Answer the following question accordingly . Price QuantityTC $25.00 $100 $24.00 10 $250 $23.00 20 $420 $22.00 30 $600 $21.00 40 $780 $20.00 50 $970 $19.00 60 $1,170 In order to maximize profit, the above firm should produce where: Select one: a. Marginal Revenue = Marginal Cost b. Price= Average Total Cost C. Price = Marginal Cost d. Economic profit= zeroPlease type your NUMERICAL answer in the space below. ENTER ONLY THE NUMBER. IF answers are in decimals, please round the number to one decimal point. Winterfell Cable TV pays $100,000 per year to earn exclusive rights to air a premium sports channel. There are two types of subscribers in Winterfell: 3,000 die-hard sports fans who will pay as much as $200 a year for the new channel and 20,000 occasional sports viewers who will pay as much as $25 a year for a subscription to it. a) If Winterfell Cable is unable to price discriminate, what price will it charge and how much are its profits? Price Profits= b) If Winterfell Cable is able to price discriminate, how much will it make in profits? Profits= What is the deadweight loss associated with the nondiscriminating pricing policy compared to the price c) discriminating policy? DWL=
- Suppose you work for Philippine Competition Commission and you find out that in province A, the only two available hospitals are planning to merge, which would result to a monopoly. If you do not allow for merging, hospital 2 will leave the market. Given the following cost functions and the information provided, would you allow for the merging of the two hospitals? Why or why not? Explain intuitively and mathematically. Hospital 1's cost function = 30 + q Hospital 2's cost function = 40 + 92 Joint cost function = 50+q+q2An organization serves 1,000 customers. Its average and marginal cost is $300 per unit and the price is $500 per unit. The organization has been asked to sell 200 more units to a health maintenance organization for a price of $450 (for the 200 units only). Which statement about this offer is true? The marginal revenue of the offer is $300 per unit The marginal cost of the offer is $350 per unit The marginal revenue associated with offer is less than the marginal cost Selling the additional 200 units to the HMO for $450 per unit will increase profitsWebsite Profit The latest demand equation for your gaming website, www.mudbeast.net, is given by q = -200x + 1000 where q is the number of users who log on per month and x is the log-on fee you charge. Your Internet provider bills you as follows. Site maintenance fee: $30 per month High-volume access fee: $0.40 per log-on Find the monthly cost as a function of the log-on fee x. C(x) = Find the monthly profit as a function of x. P(x) = %3D Determine the log-on fee you should charge (in dollars) to obtain the largest possible monthly profit. x = $ per log-on What is the largest possible monthly profit (in dollars)? $
- Andrea’s Day Spa began to offer a relaxing aromatherapy treatment. The firm asks you how much to charge to maximize profits. The first two columns in Table 10.5 provide the price and quantity for the demand curve for treatments. The third column shows its total costs. For each level of output, calculate total revenue, marginal revenue, average cost, and marginal cost. What is the profit-maximizing level of output for the treatments and how much will the firm earn in profits? Price Quantity TC $25.00 0 $130 $24.00 10 $275 $23.00 20 $435 $22.50 30 $610 $22.00 40 $800 $21.60 50 $1,005 $21.20 60 $1,225Price Quantity Total Cost $25.00 0 $130 $24.00 10 $275 $23.00 20 $435 $22.50 30 $610 $22.00 40 $800 $21.60 50 $1,005 $21.20 60 $1,225 Sharon's Day Spa began to offer a relaxing aromatherapy treatment. The firm asks you how much to charge to maximize profits. The demand curve for the treatment is given by the first two columns in the table above. The total costs are provided in the third column. For each level of output, calculate total revenue, marginal revenue, average cost, and marginal cost. What is the profit-maximizing level of output for the treatments and how much will the firm earn in profits?Website Profit The latest demand equation for your gaming website, www.mudbeast.net, is given by q=-100x + 1500 where q is the number of users who log on per month and x is the log-on fee you charge. Your Internet provider bills you as follows. Site maintenance fee: $50 per month High-volume access fee: $0.50 per log-on Find the monthly cost as a function of the log-on fee x. C(x): = X Find the monthly profit as a function of x. P(x) = Determine the log-on fee you should charge (in dollars) to obtain the largest possible monthly profit. x = $ per log-on What is the largest possible monthly profit (in dollars)? $