Possible Answers b. 256, 144, 100, 0, 512, 196, 288 AND 8, 0, 12, 16, 4 c. 5,760
ID: 1099587 • Letter: P
Question
Possible Answers
b. 256, 144, 100, 0, 512, 196, 288 AND 8, 0, 12, 16, 4
c. 5,760, 4,120, 5,120, 2,880, 0
d. plot
e. 100, 196, 256, 192, 0, 144
f. 4,920, 5,880, 5,760, 5,560, 4,800, 5,920 AND No, Yes
Many airports have lounges that offer travelers a quiet place to wait for their flights. One such lounge in Nowhere Airport sells beverages (fountain drinks and regular coffee) In addition to offering complimentary newspapers, magazines, cable television, and flight-reminder services. The cost of fountain drinks and regular coffee is negligible, so we can treat the marginal cost per drink as $0 (MC = $0). However, the Nowhere Airport Lounge has a fixed cost of $1.000 per year. The Nowhere Airport Lounge (NAL) is the only lounge at Nowhere Airport. Its customers are divided into two groups: business travelers and vacationers. There are 20 business travelers, each with an individual demand Qb = 16 - 0.5P, and 20 vacationers, each with an individual demand Qv = 12 - 0.5P, where P is the price per drink in dollars, Qt, is the number of drinks demanded by each business traveler a year, and Qv is the number of drinks demanded by each vacation traveler a year. For each traveler, NAL charges a lump-sum entrance fee and a separate price per drink. However, due to airport regulations, NAL must charge all its customers the same price. Using the blue line (circle symbols), graph an individual business traveler's demand curve. Using the purple line (diamond symbols), graph an individual vacation traveler's demand curve. Suppose that NAL wants to cater exclusively to business travelers. To maximize profits, it should charge an entrance fee of per customer per year and a price of per drink. If NAL wants to sell exclusively to business travelers. Its total profit will be NAL hires a consultant to help increase its profits. The consultant suggests that NAL sell to both business and vacation travelers. The consultant has found that the profit-maximizing price should be $4 per beverage. Using the red line (cross symbols), place a horizontal line at the price per drink that NAL will charge when it sells to both business travelers and vacation travelers. When the price per beverage is $4, what is Nowhere Airport Lounge's profit-maximizing entrance fee per customer? Use the tan triangle (dash symbols) to shade the area that represents NAL's optimum entrance fee when the price per beverage is $4. If NAL sells to both business travelers and vacation travelers using the price and entrance fee suggested by the consultant, its total profits will be Was the consultant successful in increasing NAL's profits?Explanation / Answer
a. To find the Price intercept for the business traveler demand curve (blue circles), set Qb = 0 and solve for P.
0 = 16