Question 2 (13 marks) Two products are produced from a joint process AA and XX The result is 350 Ibs of AA and 450 lbs of XX Before they can be sold they must be processed further at a cost of $280 for AA and $500 for XX The cost per batch is $160,000 The Demand varies with price charged as follows Quantity Price/lb. AA Price/lb. XX 1400 1250 1100 950 800 650 500 350| 200 50 100 150 200 250 300 350 400 450 2000 1800 1600 1400 1200 1000 s00 The following analysis is prepared by the organization FC=160,000/8001bs-$200/lb Cost of AA=280+200 =480 Cost of XX=500+200 =700 Quantity AA REVAA COSTAA PROFIT Quantity XX RevXX Cost XX poorn 50 100 150 200 250 300 350 2000 1800 1600 1400 1200 1000 800 480 480 480 480 480 480| 480 76000 132000 168000 184000 180000 156000 112000 50 100 150 200 250 300 350 400 450 1400 1250 1100 950 800 650 500 350 200 700 700 700 700 700 700 700 700 700 3500 55000 60000 50000 25000 -15000 -0000 -140000 -225000 And as such the company sells 200 units af AA and 150 units of XX 3 marks 5 marks 5 marks How profitable will they be? How much should be sold - and how profitable would they be? How does the answer change if there is a disposal fee of S240/lb of unsold AA and $180/lb of unsold XX?
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AA Revenue for AA = 200 * $1400 = $280,000 Revenue for XX = Quantity XX * Price/lb. XX Revenue for XX = 150 * $350 = $52,500 Show moreā¦
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Question 5: (12 marks) Part A: (4 marks) Consider a concert hall that seats 400 people. The concert organizers are aware that there are two different market segments. One is for regular adults defined by P1 = 600 - Q1. The other is for students and senior citizens defined by P2 = 400 - Q2. For the sake of convenience, we will assume that all costs are fixed, such that the marginal cost of each additional audience member is zero. This implies that maximizing profit is the same as maximizing revenue. The concert organizers wish to maximize profit (revenue) but can do so with the constraint that only 400 tickets can be sold. This means that the concert organizers are not able to independently maximize profit (revenue) in each market segment because that might mean having to sell more than 400 tickets. How many tickets should be sold in each market segment and at what price in each segment to maximize profit (revenue)? Part B: (8 marks) Consider a monopolist who sells in two different markets. The (inverse) demand curve in Market 1 is given by P1 = 360 - Q1. The (inverse) demand curve in Market 2 is given by P2 = 240 - Q2. For the sake of convenience, we will assume that the monopolist has zero marginal costs implying that maximizing profit and maximining revenue are synonymous for this monopolist. (i) What is the revenue-maximizing quantity and price in Market 1? What is the resulting revenue? (2 marks) (ii) What is the revenue-maximizing quantity and price in Market 2? What is the resulting revenue? (2 marks) (iii) Now suppose the monopolist did not discriminate in prices and charged the same price in both markets. What is the revenue maximizing price and quantity in this case? Show that the resulting revenue is less than what the monopolist makes when she charges two different prices across the two different markets. (4 marks)
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Sri K.
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