Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Your bus company (the SuperMegaBusUltra) offers two classes of service - Comfort Class an Awesome Class between NYC and DC. The cost to provide Comfort

image text in transcribed Your bus company (the \"SuperMegaBusUltra\") offers two classes of service - Comfort Class an Awesome Class between NYC and DC. The cost to provide Comfort class is \\( \\$ 10 \\) a seat. The cost to provide Awesome Class is \\$15 a seat. There are two types of customers: Average Consumers and Luxury Consumers. There are 50 Luxury Consumers and 100 Average Consumers. Average Consumers are will to pay \\( \\$ 35 \\) for Comfort class and \\( \\$ 40 \\) for Awesome class. Luxury Consumers are will to pay \\( \\$ 45 \\) for Comfort class and \\( \\$ 100 \\) for Awesome class. (a) What price will you charge for each class of seat that will maximize your profits? You come up with an idea. Let's remove the Comfort class and replace it with a new less expensive and nice product \"Cheapo Class\" These seats cost \\( \\$ 5 \\) to provide. Average Consumers are will to pay \\( \\$ 25 \\) for Cheapo class and \\( \\$ 40 \\) for Awesome class. Luxury Consumers are will to pay \\( \\$ 30 \\) for Cheapo class and \\( \\$ 100 \\) for Awesome class. (b) If you did remove Comfort class and replace with Cheapo class, what would be the change in profits? (Please give the actual quantity increase or decrease in revenue in your answer.)

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

More Books

Students also viewed these Accounting questions