CEE_5941 - CEE 594/ECON 494 Problem Set 1(Due Wed 9/20 in...

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CEE 594/ECON 494: Problem Set 1 (Due Wed. 9/20 in Lecture) 1. As part of this course you have been placed into groups and required to work as a group in your laboratory market exercise. Each group will receive a grade that will depend on its earnings. Assume that your team’s grade can be divided up into points and allocated among members of your group. Propose a method for allocating your team’s grade among the members of your group and discuss its implications. Discuss how the method you are proposing will impact team member behavior and the overall quality of the group effort. (This is the way in which your lab grade will be assigned, so coordinate your answer with your group). 2. As a provider of travel planning services in Ithaca, NY, you observed the following behavior of the four largest customers for these services in terms of how many trips per month they book through travel agencies as the price for this service has varied. Number of Trips/Customer Fee/Trip Customer A Customer B Customer C Customer D $100 10 0 0 0 $90 20 0 0 0 $80 30 0 10 0 $70 40 0 10 0 $60 50 10 10 0 $50 50 50 10 0 $40 50 100 10 40 $30 50 120 70 80 $20 50 130 200 80 $10 50 140 250 120 Right now three of the major travel arrangers offer their service at $20 per trip, but each can only schedule a maximum of 100 trips per month. There are also two smaller service providers whose maximum capacity is scheduling 40 trips per month but their fee is $30 per trip. a) What is the market-clearing fee/trip for this travel-booking service in Ithaca, and how many trips per month do you expect to be arranged through these agencies?
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