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SNHU ECON 500 – BAA is a private company that operates

01 / 10 / 2021 Projects

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SNHU ECON 500 – BAA is a private company that operates

1.) BAA is a private company that operates some of the largest airports in the UnitedKingdom, including Heathrow and Gatwick. Suppose that BAA recently commissioned yourconsulting team to prepare a report on traffic congestion at Heathrow. Your report indicatesthat Heathrow is more likely to experience significant congestion between July andSeptember than any other time of the year.Based on your estimates, demand is Q1d = 600 – 0.25P, where Q1d is quantity demanded forrunway time slots between July and September. Demand during the remaining nine monthsof the year is Q2d = 220 – 0.1P, where Q2d is quantity demanded for runway time slots.The additional cost BAA incurs each time one of the 80 different airlines utilizes the runway is£1,100 provided 80 or fewer airplanes use the runway on a given day. When more than 80airplanes use Heathrow’s runways, the additional cost incurred by BAA is £6 billion (the costof building an additional runway and terminal). BAA currently charges airlines a uniform feeof £1,712.50 each time the runway is utilized.What price should BAA charge for runway slots between July and September?£What price should BAA charge for runway slots for the remaining nine months?£2.) Suppose the European Union (EU) is investigating a proposed merger between two ofthe largest distillers of premium Scotch liquor. Based on some economists’ definition of therelevant market, the two firms proposing to merge enjoyed a combined market share ofabout two-thirds, while another firm essentially controlled the remaining share of the market.Additionally, suppose that the (wholesale) market elasticity of demand for Scotch liquor is-1.2 and that it costs $15.40 to produce and distribute each liter of Scotch.Based only on these data, provide quantitative estimates of the likely pre- and postmergerprices in the wholesale market for premium Scotch liquor.Instruction: Do not round intermediate calculations. Round your final answers to the nearestpenny (two decimal places).Pre-merger price: $Post-merger price: $3.) You are the owner of a local Honda dealership. Unlike other dealerships in the area, youtake pride in your “No Haggle” sales policy. Last year, your dealership earned record profitsof $1.3 million. In your market, you compete against two other dealers, and the market-levelprice elasticity of demand for midsized Honda automobiles is -1.8. In each of the last fiveyears, your dealership has sold more midsized automobiles than any other Honda dealershipin the nation. This entitled your dealership to an additional 35 percent off the manufacturer’ssuggested retail price (MSRP) in each year. Taking this into account, your marginal cost of amidsized automobile is $12,000.What price should you charge for a midsized automobile if you expect to maintain yourrecord sales?Instruction: Round your answer to two decimal places.4.) A monopoly is considering selling several units of a homogeneous product as a singlepackage. A typical consumer’s demand for the product is Qd = 100 – 0.5P, and the marginalcost of production is $80.a. Determine the optimal number of units to put in a package.unitsb. How much should the firm charge for this package?$5.) You are the manager of a monopoly that sells a product to two groups of consumers indifferent parts of the country. Group 1’s elasticity of demand is -4, while group 2’s is -6. Yourmarginal cost of producing the product is $50.a. Determine your optimal markups and prices under third-degree price discrimination.Instruction: Round your answers to two decimal places.Markup for group 1:Price for group 1: $Markup for group 2:Price for group 2: $



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