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problemset5

# problemset5 - EC332 Fall 2009 Prof Jordi Jaumandreu Problem...

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EC332, Fall 2009, Prof. Jordi Jaumandreu Problem set #5 1. (Cabral) A market consists of two population segments, A and B. An individual in segment A has demand for your product = 50  An individual in segment B has demandfor your product = 120 2  Segment has 1000 people in it. Segment has 1200 people in it. Total cost of producing units is = 5000 + 20  a. What is total market demand for your product? b. Assume that you must charge the same price to both segments. What is the pro fi t-maximizing price? What are your pro fi ts? c. Imagine now that members of segment A all wear a scarlet "A" on their shirts or blouses and that you can legally charge di ff erent prices to these people. What price do you change to the scarlet "A" people? What price do you change to those without the scarlet "A"? What are your pro fi ts now? 2. (Cabral) Coca-Cola recently announced that it is developing a "smart" vending machine. Such machines are able to change prices according to the outside temperature. Suppose for the purposes of this problem that the temper- ature can be either "High" or "Low." On days of "High" temperature, demand is given by = 280 2 , where Q is number of cans of Coke sold during the day and p is the price per can measured in cents. On days of "Low" temperature, demand is only = 160 2 . There is an equal number days with "High" and "Low" temperature. The marginal cost of a can of Coke is 20 cents. a. Suppose that Coca-Cola indeed installs a "smart" vending machine, and thus is able to charge di ff erent prices for Coke on "Hot" and "Cold" days. What price should Coca-Cola charge on a "Hot" day? What price should Coca-Cola charge on a "Cold" day?

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