Explain three ways in which Ace Body gym can practise price discrimination in their markets.

The Portfolio consists of two Tasks, which are divided as follows:Task one – a case study that is weighted at 50% of the overall grade for the portfolioRead the following fictional scenario and answer the questions shown below. Ace Body Gyms is one of the UK’s leading gyms and fitness centres and operates in an industry with many small firms. Competition within the industry is such that a single firm does not have market power. However, firms try to distinguish themselves by the quality of the service that they offer.Question 1a.The demand for gym membership at Ace Body is linear and when the price per membership is £80, zero units are demanded. When the price of gym membership is £0, then 80 units are demanded. The supply of gym membership is also linear and when the price for gym membership is £10, zero units are supplied. When the price of gym membership is £100, then 90 units are supplied. i.Given the above information, what is the equilibrium quantity and equilibrium price in this market? (2 marks)ii.Suppose a price ceiling of £50 per gym membership is imposed in this market by the government. Would this result in a shortage or surplus? Explain. (2 marks)iii.Suppose a price ceiling of £40 per gym membership is imposed in this market by the government. Would this result in a shortage or surplus? Explain. (2 marks)b.With the use of diagrams, analyse the effects of the following on the equilibrium demand and supply for gym membership at Ace Body gyms, clearly identifying any changes in price and quantity.i.Ace Body reduces the price for monthly membership. (4 marks)ii.Ace Body gym embarks on an advertising promotion giving up to 50% off gym memberships over the summer. (4 marks)iii.Next Gen gym, one of Ace Body closest competitors, reduces its membership price and at the same time customers see a decrease in their incomes. (5 marks) Question 2a.Ace Body revenue for 2018 was £2.1 million, down 35% over the previous year. Management attributes the decrease in revenue to a decrease in quantity demanded by 20% as a result of a change in price from £20 to £22 per month. Given this information calculate Ace Body PED. (4 marks) b.What would be the sign of the cross-price elasticity between gym membership and a 70% reduction in the price of home gyms sold by Amazon? (2 marks)c.Explain three ways in which Ace Body gym can practise price discrimination in their markets. What criteria are relevant for price discrimination to be effective for Ace Body? (4 marks)Question 3a.Explain how Ace Body gym can benefit from economies of scope. (4 marks)b.Identify two ways in which Ace Body gym can benefit from technical and financial economies of scale. (4 marks)c.Using the information in table 1 below, calculate the marginal cost and marginal revenue for Ace Body Gym and indicate the level of production where profit will be maximized. (6 marks) Table 1 OutputPrice received(£)Total Costs(£)1352023333324484205551785615.50108Question 4a.Ace Body is considering purchasing a new piece of equipment and has two possible choices, but can only raise enough funds to proceed with one of them. Using the Payback Period decision model, which purchase would you recommend Ace Body to undertake if there is a three year cut-off period for recapturing the initial cash outflow? Assume that the cash flows are equally distributed over the year for Payback Period calculations. (5 marks)ProjectsABCost-£10000-£25000Cash Flow Year 1£4000£2000Cash Flow Year 2£4000£8000Cash Flow Year 3£4000£12000Cash Flow Year 4£4000£20000Cash Flow Year 5£4000£26000Cash Flow Year 6£4000£32000b.Analyse the extent to which the market in which Ace Body Gym operates is subject to asymmetric information. (6 marks)c.Explain the measures that governments can take to regulate the gym and fitness industry. How effective are the use of these regulations? (8 marks)Question 5a.What kind of market structure is Ace Body Gyms operating within? Compare and contrast it with the three other market structures you have studied based on price, output and profit. Be sure to include graphs in your discussion. (20 marks)b. b. Explain the barriers to entry that might exist in the market in which Ace Body operates. (4 marks)Question 6Ace Body and one of its competitors, Next Gen Gyms, are looking into whether to invest in a new piece of gym equipment which is supposed to improve results for customers, or stick to the old equipment they are both presently using. Ace Body has been using the old standard equipment for several years and has a reputation for reliability, while Next Gen Gyms is a recent entrant with no established reputation. If both firms stick with the old equipment, Ace Body’s existing customers will see no reason to switch to Next Gen Gyms. Ace Body earns a profit if £5 and Next Gen Gyms earns £0.If Ace Body switches to the new equipment while Next Gen Gyms remains with the old, a minority of Ace Body’s existing customers will stay with them but a majority will move to Next Gen Gyms out of preference to using the old equipment. Ace Body will therefore earn a payoff of £2, and Next Gen Gyms will earn £3.If Ace Body sticks with the old equipment while Next Gen Gyms switches to the new equipment, the majority of Ace Body’s exiting customers will stay with them, but a minority will move to Next Gen Gyms out of curiosity. In this instance Ace Body’s payoff will be £3 and Next Gen Gyms payoff will be £2.Finally, if both Ace Body and Next Gen Gyms decide to switch, a large majority will continue to purchase from Ace Body out of loyalty giving them a payoff of £4. However, a small minority will move to Next Gen Gyms, giving them a payoff of £1.a.Present the information given above in a decision tree with Ace Body as the first mover. (4 marks)b.What outcomes will give the best payoff if Ace Body is the first mover? (2 marks)c.How will the result in part (b) above change if Next Gen Gyms is the first mover? (2 marks)d.Is there a first mover or second mover advantage? (2 marks)e.Discuss the usefulness of game theory analysis in decision making for Ace Body and other gyms and fitness centres. (4 marks) (100 Marks Total)Note DO NOT repeat the case study or the questions in your answers, simply put the question number and the answer.Assessment criteriaWeight (%)1.Effectiveness of explanation of key microeconomic concepts, accuracy of calculations100There will be the opportunity to discuss your progress with the Tasks during the Workshop sessions during the course of the module. The Portfolio should be submitted as a single document. There is no need for an overall introduction or an overall conclusion. You should include a cover sheet that includes the module code, the title of the module and your student number. A bibliography must be provided for each of the Tasks. The electronic version of the Portfolio must be submitted in MSWord format.If you do not provide a copy by the deadline it will mean that you have failed to comply with the submission requirements and you will FAIL the assignment. Your feedback for the assignment will be provided face to face by booking an appointment after the grades have been released. TASK Two – ESSAY that is weighted at 50% of the overall grade for the portfolioAn independent report has predicted that economic growth in the UK will slow and even become negative by the third quarter of 2020, resulting in high unemployment levels and lower investment within the UK economy. Higher oil prices are also predicted which will have a knock-on effect of a general and persistent increase in prices (inflation). The report has urged the UK government to engage more with non-European markets which it says will result in more trade, more foreign investment and more knowledge transfer and sustained economic growth. a. The management of Ace Body Gyms has asked you to evaluate the effects of the predicted changes in the UK economy outlined above on the performance of the company. Specifically, you should write an essay to address the effects of the independent report on the performance of Ace Body gyms. Performance should include, but is not limited to, the effects on price, cost, demand, investment opportunities, profits etc. (40 marks)b.Your report should also include recommendations as to how Ace Body Gyms could maintain a solid performance despite the predicted economic downturn. (40 marks) 20 marks are also awarded for the structure and presentation of material, including the use of the Harvard Citation and Referencing system. NOTE: your essay must include at least 5 academic (e.g. referred journal articles or text books) references. Word Limit: 1800 words maximum. Please note that a penalty will be incurred for exceeding the word limit +/- 10%.Assessment criteriaWeight (%)1.Effectiveness of the evaluation of the predicted changes in the UK Economy on the performance of Ace Body402.Effectiveness of recommendation on how Ace Body Gyms can maintain its performance403.Structure and presentation of material, including the use of the Harvard Citation and Referencing system.