Suppose that you are a manager for Adobe Systems, the creator of Photoshop and other software...

Transcribed Image Text:

Suppose that you are a manager for Adobe Systems, the creator of Photoshop and other software products. Adobe rents most of its products to its customers. Suppose that it has two classes of customers for its Photoshop program: students and businesspeople. Say that the demand function for students is: Qs = 500,000 programs - 1,000P. And, the demand function for businesspeople is: QB = 800,000 programs - 1,000P. In both demand functions, P is the annual rental price of the program. Because Photoshop is delivered over the Internet, the marginal cost of another program is $0. Suppose that Adobe has fixed costs of $5,000,000. Suppose price discrimination is possible. The rental price that you would recommend Adobe to charge students would be $, and the quantity of products that it should rent would be The rental price that you would recommend Adobe to charge businesspeople would be $, and the quantity of products that it should rent would be programs. Adobe's economic profit or economic loss would be $ Suppose price discrimination is not possible. The rental price that you would recommend Adobe to charge would be $ Adobe's economic profit or loss would be $ Is Adobe's economic profit larger when it price discriminates or when it sets a single rental price? and the quantity of products that it should rent would be O A. Adobe's profit is larger when it sets a single price because Adobe is able to convert more consumer surplus into profit. O B. Adobe's profit is larger when it sets a single price because it helps Adobe uniformly increase its revenues. O C. Adobe's profit is larger when it price discriminates because Adobe is able to convert more consumer surplus into profit. O D. Adobe's profit is larger when it price discriminates because it has increased Adobe's production efficiency. programs. products. How might Adobe successfully engage in price discrimination? (Check all that apply.) A. Adobe can engage in price discrimination by maintaining its market power. B. Adobe can engage in price discrimination if it can prevent arbitrage. C. Adobe can engage in price discrimination if there are at least two different customer groups in the market and it can classify each customer into the appropriate group. D. Adobe can engage in price discrimination if it sets its price independent of the intersection of marginal cost and marginal revenue. Suppose that you are a manager for Adobe Systems, the creator of Photoshop and other software products. Adobe rents most of its products to its customers. Suppose that it has two classes of customers for its Photoshop program: students and businesspeople. Say that the demand function for students is: Qs = 500,000 programs - 1,000P. And, the demand function for businesspeople is: QB = 800,000 programs - 1,000P. In both demand functions, P is the annual rental price of the program. Because Photoshop is delivered over the Internet, the marginal cost of another program is $0. Suppose that Adobe has fixed costs of $5,000,000. Suppose price discrimination is possible. The rental price that you would recommend Adobe to charge students would be $, and the quantity of products that it should rent would be The rental price that you would recommend Adobe to charge businesspeople would be $, and the quantity of products that it should rent would be programs. Adobe's economic profit or economic loss would be $ Suppose price discrimination is not possible. The rental price that you would recommend Adobe to charge would be $ Adobe's economic profit or loss would be $ Is Adobe's economic profit larger when it price discriminates or when it sets a single rental price? and the quantity of products that it should rent would be O A. Adobe's profit is larger when it sets a single price because Adobe is able to convert more consumer surplus into profit. O B. Adobe's profit is larger when it sets a single price because it helps Adobe uniformly increase its revenues. O C. Adobe's profit is larger when it price discriminates because Adobe is able to convert more consumer surplus into profit. O D. Adobe's profit is larger when it price discriminates because it has increased Adobe's production efficiency. programs. products. How might Adobe successfully engage in price discrimination? (Check all that apply.) A. Adobe can engage in price discrimination by maintaining its market power. B. Adobe can engage in price discrimination if it can prevent arbitrage. C. Adobe can engage in price discrimination if there are at least two different customer groups in the market and it can classify each customer into the appropriate group. D. Adobe can engage in price discrimination if it sets its price independent of the intersection of marginal cost and marginal revenue.

Answer rating: 100% (QA)

To determine the rental prices and quantities for students and businesspeople we can use the given demand functions For students Qs 500000 programs 1000P For businesspeople Qb 800000 programs 1000P Fi... View the full answer