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DVD retailers choose how many copies of a movie to purchase from a studio and to stock. The retailers have the right to return all unsold copies to the studio for a full refund, but the retailer pays the shipping costs for returned copies. A small mom-and-pop retailer will sell 1, 2, 3, or 4 copies with probabilities 0.2, 0.3, 0.3, and 0.2, respectively. Suppose that the retail market price of the DVD is $15 and that the retailer must pay the studio $8 for each copy. The studio's marginal cost is $1. The retailer's marginal profit is $7 for selling each copy, and the studio's marginal profit is $7 for each nonreturned copy sold to the retailer. The cost of shipping each DVD back to the studio is $2. The studio and retailer are risk neutral.
a. How many copies of the DVD will the retailer order from the studio? What is the studio's expected profit-maximizing number of copies for the retailer to order?
b. Alternatively, suppose that the studio pays the shipping costs to return unsold DVDs. How many copies would the retailer order?
c. Does the number of copies the retailer orders depend on which party pays the shipping costs? Why?
(a) What are the equilibrium quantity and equilibrium price Graph your solution. (c) If a $2 excise tax is levied on this good, what will happen to the equilibrium price and quantity. How much tax revenue does the government earn with the $2 tax.
Why would increased spending as a percentage of GDP on, say, household appliances or education in a particular economy be regarded as economically desirable. Why, then, is there so much concern about rising expenditures as a percentage of GDP on h..
Assume the following values for Figures 5.4a and 5.4b. Q1=20 bags. Q2=15 bags. Q3=27 bags. The market equilibrium price is $45 per beg. The price at a is $85 per bag. The price at c is $5 a bag. The price at f is $59 per bag.
A purely competitive wheat farmer can sell any wheat he grows for $30 per bushel. His five acres of land show diminishing returns, because some are better of wheat, the second acre 900, the third 800, the fourth 700, the fifth 600
Suppose that A(-1) in Exercise 10.5 also has an influence on S. How would this affect the fitting of the model?Exercise 10.5
What is the significance of super plasticized flowing concrete to the construction industry? What changes may have to be made in the mix proportions for flowing concrete?
The electric and magnetic fields of the composite wave resulting from the superposition of two uniform plane waves
What are the impact and long-run propensities and explain the nature of potential multicollinearity in the explanatory variables when data for marriage and income is observed each month.
Here we investigate a particular example of the model studied in Sections 9-2 and 9-3 with no government. Suppose the consumption function is given by C 100 .8 Y , while investment is given by I 50.
currently fans pay ave ticket price $5 and consumes $4 worth of refreshments at the game. Management thinking of raising the ticket price to $5.50. Compute the % in 1) tickets sold 2) ticket revenue 3) total revenue from admissions and refreshment..
Suppose that the market (in the graph above) is initially in equilibrium. Assume that consumer preferences shift and people want more of this product, and, at the same time, producers get an improvement in technology which lowers their production ..
Assume that the demand curve is given by the following: p=20 and the supply curve is given by Q=p-5. If the government puts in place a tax of 5 that must be paid by the seller the total amount of tax revenue raised is equal to what
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