Johnny's Shop-and-Pay is a regional grocery chain, and their marketing manager is trying to determine the profit-maximizing coupon program for the store's laundry detergent brand.
Coupon users at the store have an elasticity of demand for this product that equals -3, and the elasticity of demand for non-users of the coupon for the store brand equals -1.5. If the full retail (undiscounted) price of the detergent is 10 per box, what is the optimal discount to provide for coupon users? A) 25 off
B) 50 off
C) 75 off
D) The optimal strategy is to charge the same price to both groups
Question 2
At the optimum combination of two inputs,
A) the slopes of the isoquant and isocost curves are equal.
B) costs are minimized for the production of a given output.
C) the marginal rate of technical substitution equals the ratio of input prices.
D) all of the above
E) A and C only
Jacob Lawrence, Barber Shop.
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