per pairYou are the CEO of a company that advises clients on pricingstrategies. Bilbo Baggins is a profit maximizing client whoproduces uniquely styled shoes and hires you for pricingadvice. The graph shows the demand and marginal revenue(MR) curves faced by Bilbo's company for two differentgroups of consumers. Assume Bilbo can prevent the resellingof his shoes, faces constant marginal cost (MC) equal to$20/pair, can identify varying consumer groups, and has nofixed costs (so, MC ATC). Use the graph to answer thequestions.=Price$100908070605040BWhat price should Bilbo charge?He should charge the more elastic group $60/pairand the less elastic group $70/pair.3030201010MR 2Demand 2He should shutdown in the short run because price isnot greater than fixed costs.0100 200 300 40CHe should price discriminate and produce whereP = MC and charge $20/pair.He should produce where MR = MC andcharge $70/pair.

He ought to charge the more versatile gathering $60 per match and the less flexible gathering at $70…

Answered: per pair You are the CEO of a company…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Suppose Clomper's is a monopolst that manuractures and sels stampen, an extremely trendy shoe brand with na close substutes. The followng graph shows the market demand and marginal revenue ( MR ) ourves Clomper's taces, as wall as ins marginal cost ( MC ) , which is constant at $ 3 0 per pair of Stompers. For simplicty, assume that hxed costs are equal to zero; this, combined wah the fact that Clampers marginal cost is constant, means that its marginal cost curve is also equal to the average total cost ( ATC ) ourve. Trs , suppose that Compers camnct price discriminate. That is , it must darpe each consumer the same price for Stompers regardess of the consumer's wilingness and ability to pay. symod ) to shade une pronc, une green pants ( crange symbol ) to shade che consumer surpus, and the black points ( pius symood ) to shade the Suppope now that Clomper's is able to pertecty prico discriminate - that is , it knows cach corsumer's willingness to pay for a pair ar…
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