Simple Pricing Questions

Complete the individual problems and submit your solutions using Turnitin.

It is not necessary to restate the exercise/prompt, but to provide a thorough write-up of your response/solution. Submit answers only in a Word document or PDF. Use APA format for all external references.

Chapter 6: Simple Pricing

6-2 Increasing Movie Ticket Prices

To conduct an experiment, AMC increased movie ticket prices from $9 to $10 and measured the change in ticket sales. Using the data over the following month, they concluded that the increase was profitable. However, over the subsequent months, they changed their minds and discontinued the experiment. How did the timing affect their conclusion about the profitability of increasing prices?

6-3 Promotional Pricing

An end-of-aisle price promotion changes the price elasticity of a good from –2 to –3. If the normal price is $10, what should the promotional price be?

Chapter 7: Economies of Scale

 Ranger T-Shirts

The variety of Riverside Ranger logo T-shirts includes 12 different designs. Setup between designs takes one hour (and $18,000), and after setting up, you can produce 1,000 units of a particular design per hour (at a cost of $8,000). Does this production exhibit scale economies or scope economies?

Multiconcept Restaurants are a Growing Trend

A multiconcept restaurant incorporates two or more restaurants, typically chains, under one roof. Sharing facilities reduces costs of both real estate and labor. The multiconcept restaurants typically offer a limited menu compared to full-sized, stand-alone restaurants. For example, KMAC operates a combination Kentucky Fried Chicken (KFC)/Taco Bell restaurant. The food preparation areas are separate, but orders are taken at shared point-of-sale (POS) stations. If Taco Bell and KFC share facilities, they reduce fixed costs by 30 percent; however, sales in joint facilities are 20 percent lower than sales in two separate facilities. What do these numbers imply for the decision of when to open a shared facility versus two separate facilities?

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