John Boone had lice. Tiny insects crawled through his hair. He was constantly scratching his scalp....

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John Boone had lice. Tiny insects crawled through his hair. He was constantly scratching his scalp. Boone knew that there was an easy solution: He just had to buy a special shampoo at a pharmacy and wash the lice out. But Boone didn't have time for that. He had to price his bicycle. Boone, after graduating from Harvard, had invented a bicycle that was cheap to produce and worked just as well as much more expensive racing bikes. The secret was the frame: Boone had figured out how to make a strong bicycle frame out of a cardboard composite. Now, how much to charge for the bicycle? Boone's factory could produce the bicycle at a marginal cost of $1,000. Boone hired a consultant to run some focus groups. The consultant found that customers came in two groups: A and B. Each group had a different willingness to pay for the bicycle, and there were different numbers of consumers in each group, as listed in the table below: Group A B Willingness to Pay Number of Consumers $5,000 $3,000 10 2 Suppose consumers in either the US or Japan buy Boone's bicycles and then re-sell the product worldwide using eBay, an online auction site. • Which consumers would be re-selling the bicycles, and which would be buying? • How should Boone react to the possibility of online auctions? John Boone had lice. Tiny insects crawled through his hair. He was constantly scratching his scalp. Boone knew that there was an easy solution: He just had to buy a special shampoo at a pharmacy and wash the lice out. But Boone didn't have time for that. He had to price his bicycle. Boone, after graduating from Harvard, had invented a bicycle that was cheap to produce and worked just as well as much more expensive racing bikes. The secret was the frame: Boone had figured out how to make a strong bicycle frame out of a cardboard composite. Now, how much to charge for the bicycle? Boone's factory could produce the bicycle at a marginal cost of $1,000. Boone hired a consultant to run some focus groups. The consultant found that customers came in two groups: A and B. Each group had a different willingness to pay for the bicycle, and there were different numbers of consumers in each group, as listed in the table below: Group A B Willingness to Pay Number of Consumers $5,000 $3,000 10 2 Suppose consumers in either the US or Japan buy Boone's bicycles and then re-sell the product worldwide using eBay, an online auction site. • Which consumers would be re-selling the bicycles, and which would be buying? • How should Boone react to the possibility of online auctions?

Answer rating: 100% (QA)

Q1 If Boone charges 5000 per unit of bicycle only group A will purchase bicycles Thus 10 consumers will purchase Thus total revenue is 500010 50000 Th... View the full answer