4. The publisher of an online Economics Primer course is trying to sell the prim

Question

4. The publisher of an online Economics Primer course is trying to sell the primer to a group of MBA students and a group of EMBA students in the US. The maximum willingness to pay for the primer in each group of students as well as the number of students in each group is given in the table. Assume the marginal cost is $50.

Willingness to pay Number of students EMBA $300 1,000 MBA $100 2,000

What is (are) the publisher’s profit maximizing price(s)? a. Charge $300 to EMBA and $100 to MBA b. Charge either $300 or $100 (the publisher is indifferent) c. Charge a uniform price of $300 d. Charge a uniform price of $100

5. Using the same information as above(#4) and assuming marginal cost is negligible, what is(are) the profit maximizing price(s)? a. Charge $300 to EMBA and $100 to MBA b. Charge either $300 or $100 (the publisher is indifferent) c. Charge a uniform price of $300 d. Charge a uniform price of $100

6. Using the same information as above, suppose you can set one price for MBA students and one price for EMBA students. However you know that MBA students are willing to resell the Primer to EMBA students for their purchase price plus $60. MBA students pay $x and they can resell the primer for $(x + 60). Assuming there are no other cost involved in this transaction and it cannot be prevented. What are the optimal prices for the two groups of students? a. Charge $300 to EMBA and $240 to MBA b. Charge $240 to EMBA and $100 to MBA c. Charge $240 to EMBA and $240 to MBA d. None of the above

Explanation / Answer

What is (are) the publisher’s profit maximizing price(s)? a. Charge $300 to EMBA and $100 to MBA

To maximize to profit, publisher should charge their reservation price.

5) Using the same information as above(#4) and assuming marginal cost is negligible, what is(are) the profit maximizing price(s)? a. Charge $300 to EMBA and $100 to MBA

Now MC cost is negligible but in order to maximize profit he will charge the reservation price to each group.

6) Publisher will charge $100 to MBA students (maximum willingness to pay). and $240 to EMBA (as they can resell it $160).

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