Assignment
1. Suppose that individual demand for a product is given by Qd =1000 -5P. Marginal revenue is MR= 200-0.4Q, and marginal cost is constant at $ 20. There are no fixed costs.
a. The firm is considering a quantity discount. The first 400 units can be purchased at a price of $120, and further units can be purchased at a price of $ 80. How many units will the consumer buy in total?
b. Show that this second-degree price-discrimination scheme is more profitable than a single monopoly price.
2. Publishers have traditionally sold textbooks different prices in different areas of the world. For example, a textbook that sells for $70 in the US might sell for $5 in India. Although the Indian version might be printed on cheaper paper and lack color illustrations, it provides essentially the same information. Indian customers cannot afford to pay the US price.
a. Use the theories of price discrimination presented in this chapter to explain this strategy.
b. If the publisher decides to sell this textbook online, what problems will this present for pricing strategy? How might the publisher respond?
3. Regarding the discussion of when McDonald's introduced its dollar menu strategy in the fall of 2002 why was the company assuming or hoping that the demand for its products was elastic? Did this appear to be the case?
4. Compare and contrast the fast-food chains' strategies in emerging markets.
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.