percentage change in tickets sold. Would you expect ticket revenue to
rise or fall?
c. The typical fan also consumes $8 worth of refreshments at the game.
Thus, at the original $10 average price, each admission generates $18
in totalrevenue for team management. Would raising ticket prices to
$11 increase or reduce totalrevenue? Provide a careful explanation of
your finding. (Hint:If you wish, you may assume a certain number of
tickets sold per game, say 5,000. However, to answer the question the
precise number of tickets need not be specified.)- a. General Motors (GM) produces light trucks in several Michigan
factories, where its annual fixed costs are $180 million, and its
marginal cost per truck is approximately $20,000. Regional demand
for the trucks is given by: P 30,000 0.1Q, where P denotes price
in dollars and Q denotes annual sales of trucks. Find GM’s profit-
maximizing output level and price. Find the annual profit generated
by light trucks.
b. GM is getting ready to export trucks to several markets in South
America. Based on several marketing surveys, GM has found the
elasticity of demand in these foreign markets to be EP9 for a wide
range of prices (between $20,000 and $30,000). The additional cost of
shipping (including paying some import fees) is about $800 per truck.
One manager argues that the foreign price should be set at $800 above
the domestic price (in part a) to cover the transportation cost. Do you
agree that this is the optimal price for foreign sales? Justify your answer.
c. GM also produces an economy (“no frills”) version of its light truck at
a marginal cost of $12,000 per vehicle. However, at the price set by GM,
$20,000 per truck, customer demand has been very disappointing. GM
has recently discontinued production of this model but still finds itself
with an inventory of 18,000 unsold trucks. The best estimate of
demand for the remaining trucks is:
One manager recommends keeping the price at $20,000; another
favors cutting the price to sell the entire inventory. What price (one of
these or some other price) should GM set and how many trucks
should it sell? Justify your answer.- During the 1990s, Apple Computer saw its global share of the personal
computer market fall from above 10 percent to less than 5 percent.
Despite a keenly loyal customer base, Apple found it more and more
difficult to compete in a market dominated by the majority standard:
PCs with Microsoft’s Windows-based operating system and Intel’s
microchips. Indeed, software developers put a lower priority on writing
Mac applications than on Windows applications.
P30,000Q.
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