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Fun Fair Case

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Submitted By bobbyljw
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1.Fun Fair Case

A) Total cost of supplying q rides= 4000+q
B) Marginal cost is the additional cost when the quantity increase 1 unit. Fixed cost is the expenses that is not dependent on the quantity.
C)[pic]
My intuitive description is that line qa is steeper than line qb.
Patron A is more sensitive than patron B.
Coffee business may have the same patron style. Part of the consumers are price sensitive and if the coffee price is low, the will buy more. Part of the consumers are not price sensitive, their demand will not change a lot when price goes up and down.

Profit A= QA*(PA-1)=(26-4PA)*(PA-1) Marginal Profit A=30-8Pa profit B=QB*(PB-1)=(9-PB)*(PB-1) Marginal Profit B=2Pb-10
QA+QB=100
When total profit maximum if marginal profit=0
So Pa should be 3.75, and Pb should be 5
Total profit= (3.75-1)(26-4*3.75)*100+(5-1)(9-5)*100-4000=$625

2. Apple
A) P=4500-0.15Q so Q=(30000-20P/3) Profit=(30000-20P/3)*(p-1500) Marginal profit=4000-(40/3)*P When Marginal profit=0 profit goes to maximum So P=3000 Q=10000 So the price should be 3000 and the output should be 10000 units.

B) Customer Value drop down for 600$ so the new demand curve would be P=3900-0.15Q The new ideal output should be 6000 units. If the APP still set the price at 3000 per unit, the sale will fall for 4000 units. If the marginal cost is $1350, the new total profit will be (P-1350)(26000-20P/3) P should be $2625 and Q should be 8500

C) I recommend to keep the profit margin. The first reason is that no statistic shows that APP is over-capacity, which mean if you keep the price, there are still customers will buy the products, they won’t lose. The second reason is that I think APP’s target customer group is not the same as other’s. Just like what is mentioned , the home PC market, the education market, and desktop publishing

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