3 Problems

1.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  = 130 - 0.25P and the marginal cost of production is !1"0. a. #etermine the optimal num$er of units to put in a package. units

$. %o& much should the 'rm charge for this package( !

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2. As a manager of a chain of movie theaters that are monopolies in their respective markets, you have noticed much higher demand on weekends than during the week. You therefore conducted a study that has revealed two different demand curves at your movie theaters. On weekends, the inverse demand function is  P  = 20 – 0.00Q! on weekdays, it is  P  = " – 0.002 Q. You ac#uire legal rights from movie producers to show their films at a cost of $2",000 per movie, plus a $2."0 %royalty& for each moviegoer entering your theaters 'the average moviegoer in your market watches a movie only once(. )hat type of pricing strategy should you consider in this case*

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)hat price should you charge on weekends* Instruction: /ound

your answer to two decimal places.

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)hat price should you charge on weekdays* Instruction: /ound

$

your answer to two decimal places.

3. AA is a private company that operates some of the largest airports in the nited 4ingdom including %eathro& and at&ick. 6uppose that AA recently commissioned your consulting team to prepare a report on tra7c congestion at %eathro&. 8our report indicates that %eathro& is more likely to eperience signi'cant congestion $et&een 9uly and 6eptem$er than any other time of the year. ased on your estimates demand is Q1d  = "00 : 0.25 P &here Q1d  is ;uantity demanded for run&ay time slots $et&een 9uly and 6eptem$er. #emand during the remaining nine months of the year is Q2d  = 220 : 0.1P &here Q2d  is ;uantity demanded for run&ay time slots.  erent airlines utili?es the run&ay is @1100 provided 0 or fe&er airplanes use the run&ay on a given day. hen more than 0 airplanes use %eathro&’s run&ays the additional cost incurred $y AA is @" $illion Bthe cost of $uilding an additional run&ay and terminalC. AA currently charges airlines a uniform fee of @1D12.50 each time the run&ay is utili?ed. As a consultant to AA &hat pricing plan &ould clearly enhance %eathro&’s pro'ta$ility( Peak-load pr icing

hat price should AA charge for run&ay slots $et&een 9uly and 6eptem$er( @

hat price should AA charge for run&ay slots for the remaining nine months( @