# ECO 550 Strayer University Economics Essay

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Question 1

You are serving as the chair for your community’s annual wellness campaign. A key event is the annual Walk 3k, Run 10k, Ride 20k event. The event is staged entirely by volunteers and the goal is to attract community-wide awareness of getting active as a key step to wellness. In other words, the goal is not to raise money, but to prompt awareness. As the chair, you set a financial goal to break even on the one and only cost of the event, a fitness bag with the community seal and the event motto, “I AM ON THE RIGHT TRACK!”

The cost of the bags, which must be ordered in batches of 100, are:

 Bags Fixed Cost Variable Cost Total Cost Marginal Cost 0 \$1,700 \$ – \$1,700 100 \$1,700 \$500 \$2,200 200 \$1,700 \$1,200 \$2,900 300 \$1,700 \$2,700 \$4,400 400 \$1,700 \$5,200 \$6,900 500 \$1,700 \$9,000 \$10,700 600 \$1,700 \$15,000 \$16,700 700 \$1,700 \$23,800 \$25,500 800 \$1,700 \$36,800 \$38,500 900 \$1,700 \$55,800 \$57,500 1,000 \$1,700 \$83,000 \$84,700

Question 2

 Bags Fixed Cost Variable Cost Total Cost 0 \$1,700 \$ – \$1,700 100 \$1,700 \$500 \$2,200 200 \$1,700 \$1,200 \$2,900 300 \$1,700 \$2,700 \$4,400 400 \$1,700 \$5,200 \$6,900 500 \$1,700 \$9,000 \$10,700 600 \$1,700 \$15,000 \$16,700 700 \$1,700 \$23,800 \$25,500 800 \$1,700 \$36,800 \$38,500 900 \$1,700 \$55,800 \$57,500 1,000 \$1,700 \$83,000 \$84,700

Given the above information on cost, if you charge \$15 per entry, what is the breakeven quantity of bags that you should order? Orders must be placed in blocks of 100 bags.

Please select any/all viable approaches below:

 Use the profit maximizing rule, MR ≥ MC, buy 300 bags. Use the profit maximizing rule, MR ≥ MC, buy 200 bags. Use Qb = F/(MR-AVC) where Qb is the breakeven quantity to be determined, the optimal quantity of bags is 300. Use Qb = F/(MR-AVC) where Qb is the breakeven quantity to be determined, the optimal quantity of bags is 200.

Question 3

Your marketing department just undertook a major advertising campaign promoting the quality of your Best Brand Bike Shorts—BBB Shorts.

They have provided you with an estimate of the success of the campaign stating: “the price elasticity of demand has decreased from-5.76 to -3.76.”

Before the campaign, your price was \$240 per pair of BBB Shorts. What should the new price be?

Please enter the new price here: \$

[a]

Question 4

Seven years ago, you started a crosstown delivery service. The service is an environmentally friendly business and, given all the traffic congestion, you are also the fastest service in the city since your entire crew are bicyclists. You have two types of service. You have a small parcel service for anything that is flat and measures less than 11×17. You have a package service using a 100 lb. capacity bike trailer for anything weighing up to 10 lbs. As a way to introduce the new package service when you implemented the small package service, you charged the same price for packages as parcels. You are now wondering if you should charge different prices for the parcel and package service.

Complete the table below for the combined market of parcels and packages.

 Price Parcels and Packages TR MR TC MC MR-MC Profit 50 5,000 1,600 3,400 90 10,800 83 2,300 10 73 8,500 80 190 15,200 63 3,000 10 53 260 18,200 43 3,700 10 33 14,500 60 19,800 23 4,400 10 13 15,400 50 400 20,000 3 5,100 10 -7 470 18,800 -17 5,800 10 -27 13,000 30 16,200 -37 6,500 10 -47 9,700 20 610 12,200 -57 7,200 10 -67 10 680 6,800 -77 7,900 10 -87 -1,100

Question 5

Seven years ago, you started a crosstown delivery service. The service is an environmentally friendly business and, given all the traffic congestion, you are also the fastest service in the city since your entire crew are bicyclists. You have two types of service. You have a small parcel service for anything that is flat and measures less than 11×17. You have a package service using a 100 lb. capacity bike trailer for anything weighing up to 10 lbs. As a way to introduce the new package service when you implemented the small package service, you charged the same price for packages as parcels. You are now wondering if you should charge different prices for the parcel and package service.

Complete the table below for the parcels market.

 Price Parcels TR MR TC MC MR-MC Profit 100 0 0 1,150 90 4,500 90 1,650 10 80 2,850 100 8,000 70 2,150 10 60 5,850 70 150 10,500 50 2,650 10 40 7,850 60 200 12,000 30 3,150 10 20 50 12,500 10 3,650 10 0 8850 300 12,000 -10 4,150 10 -20 7850 30 350 10,500 -30 4,650 10 -40 20 8,000 -50 5,150 10 -60 2850 450 4,500 -70 5,650 10 -80 -1,150

Question 6

Seven years ago, you started a crosstown delivery service. The service is an environmentally friendly business and, given all the traffic congestion, you are also the fastest service in the city since your entire crew are bicyclists. You have two types of service. You have a small parcel service for anything that is flat and measures less than 11×17. You have a package service using a 100 lb. capacity bike trailer for anything weighing up to 10 lbs. As a way to introduce the new package service when you implemented the small package service, you charged the same price for packages as parcels. You are now wondering if you should charge different prices for the parcel and package service.

Complete the table below for the packages market.

 Price Packages TR MR TC MC MR-MC Profit 100 50 5,000 450 4,550 70 6,300 65 650 10 55 5,650 80 7,200 45 850 10 35 6,350 70 110 7,700 25 1,050 10 15 130 7,800 5 1,250 10 -5 6,550 50 7,500 -15 1,450 10 -25 6,050 40 170 6,800 -35 1,650 10 -45 190 5,700 -55 1,850 10 -65 3,850 20 4,200 -75 2,050 10 -85 10 230 2,300 -95 2,250 10 -105 50

Question 7

Should the delivery service charge one price or will segmentation increase profits? Support your conclusion by calculating the profit from each strategy provided in Questions 4, 5, & 6.

Question 8

You help couples book their perfect honeymoon. You currently offer plans for a cruise and for a casino stay.

Your sales manager is getting her MBA and has suggested you might consider bundling as a way to boost profits.

The table below shows the customer preferences. Your costs are \$100 for the first booking and \$50 for each additional booking.

 Cruise Casino Customer 1 \$7,000 \$3,000 Customer 2 \$2,000 \$6,000

Given the preferences, would bundling improve profits over the high-cost strategy? Support your conclusion by showing if (by how) profits differ under each strategy.

Question 9

Follow up question (note that the dollar amounts have not changed from the previous scenario.)

You help couples book their perfect honeymoon. You currently offer plans for a cruise and for a casino stay.

Your sales manager is getting her MBA and has suggested you might consider bundling as a way to boost profits.

The table below shows the customer preferences. Your costs are \$100 for the first booking and \$50 for each additional booking.