Question

4. A manufacturer of microwaves has discovered that male shoppers, on average, have lower values for microwave ovens than female shoppers. Additionally, male shoppers attribute almost no extra value to an auto-defrost feature, while female shoppers, on average, value the auto-defrost feature. There is little additional cost to incorporating an auto-defrost feature. The manufacturer is considering introducing two different models. The manufacturer has determined that men value a simple microwave at $70 and one with auto-defrost at $80, while women value a simple microwave at $80 and one with auto-defrost at $150. If there is an equal number of men and women, what pricing strategy will yield the greatest revenue? What if women comprise the bulk of microwave shoppers?

Answer 1

The price increase of refrigerators by only $50 despite $100 external costs is due to consumer surplus.

Step-by-step explanation:

The increase in the market price of refrigerators by only $50, even though the external costs of pollution were $100, can be attributed to the concept of consumer surplus. Consumer surplus refers to the difference between what consumers are willing to pay for a product and the actual price they pay. In this case, even though the external costs pushed up the production cost, the market price increased by a lesser amount due to the willingness of consumers to pay higher prices for refrigerators.

Answer 2

Answer: As per the demographic structure there are equal no. of man and woman are same therefore pricing should be done by taking into consideration both equally.

Explanation: . The prime objective of every business is to maximize their profit and this could be only done when price charged for the product is reasonable. Thus, to secure the customer base company should sell simple microwave for $70 and the one with auto defrost $80. If the company places $70 for simple and $150 for auto defrost women might also not purchase the later one thus buy placing $70 and $80 on two types company will secure a strong base for males in simple microwave and additional male base of male in auto defrost along with females as the females will be having it at cheaper prices while some males may also purchase it as the auto defrost is suitably priced according to their valuation.

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If the majority of shoppers is female then 480 should be priced for simple and $150 for auto defrost.