Reference no: EM131101562
Economics problems:
1. (Problem#1) Some golf clubs charge an up-front fee to join and a per-game charge for their members. Others do not charge a membership fee but charge a higher per-game fee for services. Consider clubs in two different locations. One is located in a suburban area where the residents tend to be of similar age, income, and occupation. The other is in the city with a more diverse population.
a. Which of the locations is more likely to charge a membership fee?
b. Suppose for the suburban club, each one of their customers has a demand for golf games represented by P = 100-3Q. The marginal cost of providing service for one game is $10. Devise a two-part tariff pricing strategy that will exhaust all consumer surpluses.
2. (Problem#2) Wet-n-Wild Indoor Water Park offers family fun year-round in the Northstar state to locals and out-of-state visitors to the nearby Mall of America. The demand for day-passes to the water park for each market segment is independent of the other market segment. The marginal cost of providing service to each visitor is $5 per day. Suppose the daily demand curves for the two market segments are:
Locals: QL=3000-200P or P = 15-0.005QL
Out-of-town: QO=3000-100P or P = 30-0.01QO
a. If Wet-n-Wild Indoor Water Park charges one price to all visitors, what is the profit maximizing price? How many day-passes will be sold per day?
b. If Wet-n-Wild Indoor Water Park charges one price to locals, what is the profit maximizing price for locals? How many day-passes will be sold per day to locals?
c. If Wet-n-Wild Indoor Water Park charges one price to out-of-towners, what is the profit maximizing price for out-of-town guests? How many day-passes will be sold per day to out-of-town guests?
d. Compare the prices from uniform pricing to the prices from price discrimination. Explain how the company would implement the price discrimination.
3. (Problem#3) Assume the industry demand for a product is P = 1000 - 20Q. Assume that the marginal cost of the product is $10 per unit.
a. What price and output will occur under pure competition? What price and output will occur under pure monopoly?
b. Draw a graph that shows the lost gains from trade that result from having a monopoly.
4. (Problem#4) As a result of strikes in Canada the world price of nickel rose by 20 percent in December. Over the same period, the quantity demanded of nickel decreased from 10,000,000 to 8,500,000 pounds worldwide. The world price of nickel was 70 cents per pound before the strikes.
a. Show graphically the effect of Canadian strikes on the market for nickel.
b. Given the information above, what's the price elasticity of the world demand for nickel over the relevant price range?
c. Did the total expenditure for nickel increase, decrease, or remain constant after the strikes? How is this consistent with your answers to part (a) and (b)? Explain clearly and concisely.
|
What are the properties of the estimated b coefficients
: Keynesian consumption model has been criticized on the ground that assumes constant MPC. To resolve this problem you are running the consumption model for US economy as: Explain step by step how you can estimate this model. What are the properties of..
|
|
What profits per customer will be earned
: The individual demand for a slice of pizza at Sam’s Pizza is given by QD = 6 – P. Assume the marginal cost of a slice is constant at $1 and the marginal revenue function is 6- 2Q. What is the profit-maximizing price and quantity if Sam’s sells all pi..
|
|
Classical investment theory believes that investment depends
: Classical Investment theory believes that’s investment depends on real GDP and real investment rate. You are estimating an investment model based on theory as: I= B0+B1+B2r+U Where I is investments, Y is real GDP, r is the interest rate, and U is sto..
|
|
Estimating a cross-section regression
: You are estimating a cross-section regression for a sample of 100 cities in the US in which you hope to explain expenditure on education as a function of the median income in the community, the number of school-age children, and the level of state an..
|
|
What price and output will occur under pure competition
: Assume the industry demand for a product is P = 1000 - 20Q. Assume that the marginal cost of the product is $10 per unit. What price and output will occur under pure competition? What price and output will occur under pure monopoly?
|
|
Short run and the long run for perfectly competitive firm
: The distinction between the short run and the long run for a perfectly competitive firm or a monopolist is that:
|
|
Determine the rate of return of on investment
: The cost of a water jet machine to be used for slicing cheese is $45,640. The machine will generate net annual income of $10,000 during its useful life of 7 years. Determine the rate of return of on investment in this machine. Express the answer as a..
|
|
Auto damage for several groups of potential customers
: No-state insurance Company has made the following estimate of auto damage for several groups of potential customers who own cars worth $10,000. there are an equal number of customers in each group. No-state is risk-neutral.
|
|
Important example of aggregate demand shock
: Demand Shocks – As we’ll continue to discuss in class, a recession may reflect declines in aggregate demand, aggregate supply, or both. Are swings in consumer sentiment characteristic of recessions? Plot a measure of sentiment (FRED code: UMCSENT) an..
|