Question.1917 - Complete the individual problems and submit your solutions using Turnitin. It is not necessary to restate the exercise/prompt, but to provide a thorough write-up of your response/solution. Submit answers only in a Word document or PDF. Use APA format for all external references. Chapter 6: Simple Pricing 6-2 Increasing Movie Ticket Prices To conduct an experiment, AMC increased movie ticket prices from $9 to $10 and measured the change in ticket sales. Using the data over the following month, they concluded that the increase was profitable. However, over the subsequent months, they changed their minds and discontinued the experiment. How did the timing affect their conclusion about the profitability of increasing prices? 6-3 Promotional Pricing An end-of-aisle price promotion changes the price elasticity of a good from –2 to –3. If the normal price is $10, what should the promotional price be? Chapter 7: Economies of Scale and Scope 7-3 Ranger T-Shirts The variety of Riverside Ranger logo T-shirts includes 12 different designs. Setup between designs takes one hour (and $18,000), and after setting up, you can produce 1,000 units of a particular design per hour (at a cost of $8,000). Does this production exhibit scale economies or scope economies? 7-6 Multiconcept Restaurants are a Growing Trend A multiconcept restaurant incorporates two or more restaurants, typically chains, under one roof. Sharing facilities reduces costs of both real estate and labor. The multiconcept restaurants typically offer a limited menu compared to full-sized, stand-alone restaurants. For example, KMAC operates a combination Kentucky Fried 3/18/24, 5:39 PM 3.5 Homework Assignment https://floridatech.instructure.com/courses/8916/assignments/187151 2/2 Chicken (KFC)/Taco Bell restaurant. The food preparation areas are separate, but orders are taken at shared point-of-sale (POS) stations. If Taco Bell and KFC share facilities, they reduce fixed costs by 30 percent; however, sales in joint facilities are 20 percent lower than sales in two separate facilities. What do these numbers imply for the decision of when to open a shared facility versus two separate facilities? Parameters: Submit a Word document or PDF and use APA format. No handwritten submissions. Due: Sunday by 11:59 p.m. ET Submission method: Turnitin Points: 25 Plagiarism You are expected to write primarily in your own voice, using paraphrase, summary, and synthesis techniques when integrating information from class and outside sources. Use an author’s exact words only when the language is especially vivid, unique, or needed for technical accuracy. Failure to do so may result in charges of Academic Dishonesty. Overusing an author’s exact words, such as including block quotations to meet word counts, may lead your readers to conclude that you lack appropriate comprehension of the subject matter or that you are neither an original thinker nor a skillful writer.
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Chapter 6 Increasing Movie Ticket Prices In analyzing AMC's experiment on ticket pricing, the timing of data collection and evaluation plays a crucial role in the accuracy and reliability of their conclusions regarding profitability. Initially, after increasing the ticket price from $9 to $10, AMC observed a short-term rise in revenue over the subsequent month, leading to the initial conclusion that the price hike was beneficial. This period likely reflected an immediate reaction to the price change, where the demand for movie tickets remained relatively inelastic - consumers' purchasing behavior did not significantly alter due to the slight increase in price. However, the decision to revert to the original pricing model in the following months suggests a shift in AMC's assessment of the price increase's long-term profitability. Several factors might have influenced this revised conclusion. Over a more extended period, consumers could have adjusted their behavior in response to the price hike, possibly seeking alternatives or reducing movie-going frequency. This behavioral shift could lead to a decrease in ticket sales volume, offsetting the initial revenue gains from the higher ticket price. Furthermore, the extended timeline allowed for a more comprehensive analysis of consumer behavior patterns, including factors like seasonal variations in movie-going habits, the impact of competitive pricing strategies, or changes in the broader economic environment (Jackson, 1998). Thus, the timing of the data collection significantly impacted AMC's conclusions, highlighting the importance of considering both short-term and long-term effects when evaluating the profitability of pricing strategies. The initial positive outcome was not sustained over time, underscoring the necessity of ongoing analysis and adaptability in business decision-making. Promotional Pricing Price elasticity of demand measures how much the quantity demanded of a good responds to a change in its price (Jackson, 1998). A change in elasticity from –2 to –3 indicates that the good has become more sensitive to price changes, meaning consumers are likely to respond more significantly to a price adjustment. Given the original price of $10 and the initial elasticity of –2, the question seeks to determine the new promotional price that aligns with an increased elasticity of –3. To calculate this, the formula for price elasticity of demand is as follows: Elasticity= % change in quantity demanded/% change in price Without specific data on quantity changes, a conceptual approach is applied. More elastic demand (–3) necessitates a price that significantly differs from the original to stimulate a proportionately larger response in demand. Generally, a lower promotional price is implied to achieve the desired increase in demand elasticity, enhancing sales volume. Typically, businesses would determine the exact promotional price by analyzing historical sales data, consumer behavior, and market conditions, ensuring the new price maximizes both sales volume and total revenue. Chapter 7 Ranger T-Shirts The production process of Riverside Ranger logo T-shirts, which involves an initial setup cost and time for each design followed by the production cost demonstrates a blend of economies of scale and scope. Economies of scale refer to cost advantages reaped by companies when production becomes efficient, as costs can be spread over a larger number of goods (Jackson, 1998). In this case, after the setup for a design is complete, producing 1,000 units per hour at a relatively lower cost signifies economies of scale. The more units produced, the lower the average cost per unit, due to the fixed setup cost being spread over a larger output. On the other hand, economies of scope are evident in the ability to produce 12 different designs. This variety allows the company to spread the setup and production costs across different products, appealing to a broader market segment without significantly increasing total costs. The initial high setup cost ($18,000) and time (one hour) for switching between designs is a fixed cost that enables the production of a variety of designs, which is characteristic of economies of scope. Multiconcept Restaurants The multiconcept restaurant model, exemplified by KMAC's combination of Kentucky Fried Chicken (KFC) and Taco Bell, presents a strategic approach to minimizing fixed costs while diversifying offerings. The decision to operate shared facilities, resulting in a 30 percent reduction in fixed costs (real estate and labor), against a backdrop of 20 percent lower sales compared to operating separate facilities, necessitates a careful analysis. The reduced fixed costs in a shared facility model significantly enhance operational efficiency and profitability, particularly in high-cost locations or under tight budget constraints (Jackson, 1998). This model is especially appealing when capital is limited or when the goal is to maximize the utilization of space and labor. However, the 20 percent drop in sales signals potential drawbacks, possibly due to a diluted brand identity, customer preference for standalone experiences, or operational complexities. The decision to opt for a shared facility over two separate ones hinges on the specific financial and strategic objectives. If the primary goal is to minimize initial investment and fixed costs while quickly capturing market share in a new or competitive location, a shared facility might be advantageous. Conversely, if the brands have strong standalone potential and there is a clear demand for full-sized, individual experiences that could command higher sales volumes, separate facilities may be more beneficial. Reference Jackson, D. (1998). Profitability, mechanization and economies of scale. Routledge.More Articles From Business Management
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