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Unformatted text preview: Economics 104B Problem Set #3 (Due May 19) Spring 2011 1. You have been just hired as manager of a health spa. The owner has commis- sioned a market study that estimates the average consumer’s monthly demand for visiting the health spa to be Q = 10- 1 2 P. The cost of operating is C ( Q ) = 2 Q , where Q is the number of visits. The owner has been charging a $64 per month membership fee and a $4 per-visit fee. Part of your salary is 10% of the monthly profits. Suggest a pricing strategy that will increase your salary. 2. Suppose a mail-order business has a monopoly on video games in the places A and B. These two places are quite a distance away from each other. The demand for video games in place A is Q A = 55- p A and the demand in place B is Q B = 70- 2 p B . The monopolist can produce video games at the constant marginal cost of $5 per unit. a. If the firm can ensure that video games sold in place A are not resold place B, and vice versa, how many video games will the firm sell in these two places?and vice versa, how many video games will the firm sell in these two places?...
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This note was uploaded on 12/26/2011 for the course ECON 104B taught by Professor Qin during the Fall '09 term at UCSB.
- Fall '09