Dredeml Case Study Solution

He could increase his profitability because of the marginal cost and marginal revenue of the musical acts is equal or the marginal costs are higher. The marginal cost is $5. But the marginal revenue cannot be determined. The price needs to be increased to levels where the marginal cost and marginal revenue equal. He is not keeping himself engaged in elastic the administration effectively. In this scenario he should set price so as to fill the capacity of the bar. If he increases the cover charge he would discourage some customers. He could raise it until the line forming outside decreases into just a few people. Additionally, Market research is very vita and should be aware what his competitors are doing and he can provide high quality of services …show more content…
Purchasers differ in their willingness to pay for the continued use of the method. Those who value it a lot will purchase many different accessories. Those who have a lower willingness to pay are going only gets the more basic bits. Therefore, a higher margin for the accessories allows Dremel to extract more of the surplus from high types without losing the low types. Selecting a poorly demanded design means lots of unsold merchandise and losses. For examples, a consumer surplus and consumer demand depend on the degree of price discrimination which a monopolist practices. In the case of first degree discrimination, the consumer surplus is zero and in the case of second and third degree price discrimination, the consumer surplus is not zero but is not as high as in the case of perfectly competitive market. This is because the accessories have many different applications as compared to the lottery. Therefore, Dremel will be getting higher profit of accessories than …show more content…
Public law should also allow discrimination in customer selection. This will help the healthcare insurance industry to reach long term equilibrium. Additionally, adverse selection refers to the problem of hidden information. It means that one side of the market has more information than the other side of the market. In the market for healthcare insurance, the seekers of insurance have more information about their health condition as compared to the providers of insurance. The risky borrowers are benefited in this case because the health insurance firms will set their premium value based on the average risk. Thus, less risky borrowers of policy will have to pay higher premiums and risky borrowers of policy will have to pay a low premium on their insurance. Furthermore, the risky borrowers are less likely to take actions that help to reduce the health