MNO Limited publishes a magazine targeted at urban professionals who live on the east and west coasts of the U.S., and all of the magazines are printed at a marginal cost of 0.50 per copy at a publishing plant in Kansas.
If the East Coast elasticity of demand for the magazine is -1.25 and the West Coast elasticity of demand is -1.50, what prices should MNO Limited charge for the magazines in these two markets in order to maximize profits? A) Price should be 0.50 in both markets
B) Price should be 2.50 on the West Coast and 1.50 on the East Coast
C) Price should be 1.50 on the West Coast and 2.50 on the East Coast
D) Price should be 0.40 on the West Coast and 0.33 on the East Coast
Question 2
A new toll road was built in Southern California between San Juan Capistrano and Costa Mesa. On average, drivers save 10 minutes taking this road as opposed to the old road. The toll is 2; the fine for not paying the toll is 76.
The probability of catching and fining someone who does not pay the toll is 90. Individuals who take the road and pay the toll must therefore value 10 minutes at a minimum A) between 1.80 and 68.40.
B) between 2 and 68.40.
C) 1.80.
D) between 1.80 and 76.
E) more than 76.
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