Question 9 25 points Save Answer Trojan Towers, Inc. 1.000 apartments to rent near USC. They set rental agreements each year for 1 year starting on June 1st. Based on historical data, they estimate that the demand for apartments for the period June 1, 2020 - May 31, 2021, is given by D(p) - 1100 -0.5*p. where p is the price to rent one apartment per month For this question, you may assume all apartments have the same rent, and all existing residents will pay the new rental price starting June 1st. a) (4 points) To maximize revenue, what should be the new one-month rental price? b) (2 points) How many apartments should Trojan Towers expect to rent at the price you found in part a)? What will be their expected revenue? c) (3 points) Trojan Towers has decided to renovate several of the older apartments. This requires they remove 40% of their apartments from inventory for the next year. Does this change your pricing strategy from part a)? If so, what is your new price? d) (3 points) In addition to the planned renovation above, there has been an unexpected fire at one of the apartment complexes. An additional 100 residences now need renovation and are removed from inventory. Does this change your pricing strategy from part c)? If so, what is your new price? For the remaining parts of the question please assume that Trojan Towers is working with their full inventory of 1,000 apartments. e) (5 points) To improve sales, Trojan Towers is considering offering 1 free gym membership per apartment to each tenant. (So if there are 2 people in the apartment, they only get 1 membership.) One gym membership costs Trojan Towers $100. To optimize profit. what should Trojan towers now charge for rent? Inspired by one of their USC Marshall interns, Trojan Towers wants to engage in some price discrimination. Specifically, tenants can choose between 1. Renting an apartment for S1400 per month II. Renting an apartment and a parking space for $1600 per month (There is an existing, very large parking garage, so parking spaces are free for Trojan Towers.) They assume that customers with a higher willingness to pay will take the second option since parking around USC is very scarce. 0 (5 points) Suppose that Trojan Towers's assumption is correct, namely, all people with a willingness-to-pay of at least $1600 prefer the second option. What will be the expected revenue from this strategy? (Assume Demand is still D(p) - 1100 -0.5 p). g) (2 points) Suppose Trojan Towers's assumption is wrong, namely, most of their tenants don't own cars so everyone prefers option 1. What will be their revenue? b) (2 points) How does your revenue in part g) compare to your revenue in part b)? Explain intuitively why it is greater/less than/equal to the revenue from part b). Question 9 25 points Save Answer Trojan Towers, Inc. 1.000 apartments to rent near USC. They set rental agreements each year for 1 year starting on June 1st. Based on historical data, they estimate that the demand for apartments for the period June 1, 2020 - May 31, 2021, is given by D(p) - 1100 -0.5*p. where p is the price to rent one apartment per month For this question, you may assume all apartments have the same rent, and all existing residents will pay the new rental price starting June 1st. a) (4 points) To maximize revenue, what should be the new one-month rental price? b) (2 points) How many apartments should Trojan Towers expect to rent at the price you found in part a)? What will be their expected revenue? c) (3 points) Trojan Towers has decided to renovate several of the older apartments. This requires they remove 40% of their apartments from inventory for the next year. Does this change your pricing strategy from part a)? If so, what is your new price? d) (3 points) In addition to the planned renovation above, there has been an unexpected fire at one of the apartment complexes. An additional 100 residences now need renovation and are removed from inventory. Does this change your pricing strategy from part c)? If so, what is your new price? For the remaining parts of the question please assume that Trojan Towers is working with their full inventory of 1,000 apartments. e) (5 points) To improve sales, Trojan Towers is considering offering 1 free gym membership per apartment to each tenant. (So if there are 2 people in the apartment, they only get 1 membership.) One gym membership costs Trojan Towers $100. To optimize profit. what should Trojan towers now charge for rent? Inspired by one of their USC Marshall interns, Trojan Towers wants to engage in some price discrimination. Specifically, tenants can choose between 1. Renting an apartment for S1400 per month II. Renting an apartment and a parking space for $1600 per month (There is an existing, very large parking garage, so parking spaces are free for Trojan Towers.) They assume that customers with a higher willingness to pay will take the second option since parking around USC is very scarce. 0 (5 points) Suppose that Trojan Towers's assumption is correct, namely, all people with a willingness-to-pay of at least $1600 prefer the second option. What will be the expected revenue from this strategy? (Assume Demand is still D(p) - 1100 -0.5 p). g) (2 points) Suppose Trojan Towers's assumption is wrong, namely, most of their tenants don't own cars so everyone prefers option 1. What will be their revenue? b) (2 points) How does your revenue in part g) compare to your revenue in part b)? Explain intuitively why it is greater/less than/equal to the revenue from part b)