WAL I W I ol Mk Mind ol IWIINIVI I W] & | do? pIWFIIIRD Due on Canvas by 1 PM on April 3 (Monday), 2023; No extensions allowed (This assignment must be answered on an individual basis without any consultation with others) 1. Suppose the own price elasticity of the Maxwell House coffee brand (which is the only brand of coffee sold at the store) at the Schnucks store in Clayton is - 3.5. The current retail price of Maxwell House at the Schnucks store is $4 and the retail profit margin of the brand is 25 %. Schnucks pays a wholesale price of $3.10 per unit to Kraft Foods (the company that manufactures the Maxwell House brand) for each unit of the brand. a. Will a retail price cut of 10 % on the brand be profitable to the Schnucks store? Why or why not? b. What is the minimum price elasticity for the Maxwell House brand at which a 10 % price cut would be profitable to the Schnucks store? (Hint: As long as the price elasticity of the brand was above this minimum price elasticity, a 10 % price cut would always be profitable to the Schnucks store) [3 POINTS] 2. The Schnucks store at Clayton introduces a second brand of coffee at the store, i.e., Folgers (manufactured by J. M. Smucker Company). a. Would you expect the own price elasticity of the Maxwell House coffee brand at the store to remain the same after the introduction of the Folgers brand? Why or why not? b. What would you expect to happen to the optimal retail price of Maxwell House after the introduction of the Folgers brand? Clearly explain the reason for your answer. [4 POINTS] 3. [Use Excel file 3-Orangeluice.xlsx to answer this question] In class, we discussed how a Dominicks store must jointly optimize the weekly retail prices (per ounce) of five brands of refrigerated orange juice by maximizing category profit. The optimized retail prices (per ounce) that we obtained in class, using Solver and imposing the constraint that each brand's retail price (per ounce) must be no larger than $0.05, turned out to be as follows: Brand 1 (Tropicana Premium 96 ounce): $0.05 Brand 2 (Tropicana Premium 64 ounce): $0.05 Brand 3 (Tropicana Regular 64 ounce): $0.0369 Brand 4 (Minute Maid Regular 64 ounce): $0.05 Brand 5 (Dominicks Regular 64 ounce): $0.0345 The maximized weekly category profit at the store (corresponding to the above optimal prices for the five brands) was $1864.98. [8 POINTS] Good Luck! Suppose PepsiCo (manufacturer of Tropicana brands) advises Schnucks to maintain identical retail prices (per ounce) for all Tropicana brands (i.e., Brands 1, 2, 3) so that there is a consistent price image for Tropicana brands. Using Solver, derive the optimal retail prices (per ounce) for the five brands under this price consistency constraint. (Hint: Continue to impose the constraint that each brand's retail price (per ounce) must be no larger than $0.05). Report the maximized weekly category profit at the store under the above price consistency constraint. s it still equal to $1864.98? Why or why not? Use the optimal markup rule (aka margin arithmetic 3) of Module 1 to derive the optimal retail prices (per ounce) for the five brands. Report these optimal retail prices (per ounce). If the optimal retail price (per ounce) for a brand turns out to be higher than $0.05, simply report $0.05 as the optimal retail price (per ounce) for that brand. Are these five retail prices (per ounce) identical to those derived in part (a) using Solver? Calculate the category profit at the store if one were to set the retail prices (per ounce) for the five brands equal to the optimal retail prices (per ounce) calculated in part (c). Is this category profit identical to the category profit calculated in part (b)? Why or why not