QUESTION 1: [40 points] ZipRecruiter is a large online recruiting platform which charges employers a monthly subscription fee to post jobs (but is free for job seekers). In September 2015, ZipRecruiter hired two business school professors to conduct a series of experiments that randomly varied the price of a monthly subscription to new customers only. The experiment was designed so that when each potential employer hit the paywall, they were asked to sign up at a randomly assigned monthly price. The resulting data were: Monthly $19 $59 $99 $159 $199 $249 Price $299 $399 Conversion 34.5% 31.5% 23.0% 20.0% 18.0% 15.5% 14.5% Rate 12.0% The conversion rate is obtained by dividing the number of employers who choose to subscribe at a given price by the number of employers who received that particular price offer. (a) [8 points] What is your best estimate of the price elasticity evaluated at $159 per month? (b) [8 points] What is your best estimate of the price elasticity evaluated at $199 per month? (c) [8 points] What is the marginal revenue for ZipRecruiter at a price of $199 per month? Should ZipRecruiter charge a price above $199 per month? Explain. After careful study, ZipRecruiter's team of crack analysts are able to estimate that its marginal cost is $19 per subscriber per month. (d) [10 points] Is the optimal price for ZipRecruiter greater or less than $399 per month? Explain. (e) [6 points] In a meeting someone suggests that ZipRecruiter has many competitors and says that profits would instead be maximized at P = MC = $19 per month. Are they right or wrong? Explain