Suppose Island Bikes, a Profit-Maximizing Firm, Is the Only Bike

question 129

Multiple Choice

Suppose Island Bikes, a profit-maximizing firm, is the only bike rental company in a small resort town. The marginal cost to Island Bikes of renting out a bike is $3, and Island Bikes has no fixed costs. Each day Island Bikes has six potential customers, whose reservations prices are listed below. $$\begin{array} { | c | c | } \hline \text { Customer } & \begin{array} { c } \text { Reservation Price } \\( \$ / \text { Rental } ) \end{array} \\\hline \mathrm { A } & 22 \\\hline \mathrm { B } & 16 \\\hline \mathrm { C } & 12 \\\hline \mathrm { D } & 8 \\\hline \mathrm { E } & 6 \\\hline \mathrm { F } & 4 \\\hline\end{array}$$ What is the socially optimal number of bikes for Island Bikes to rent out each day?

• A)6
• B)5
• C)4
• D)3

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Definitions:

Inner Bodily States

The physical sensations and feelings that originate within the body, such as hunger, thirst, fatigue, or pain.

External Incentives

Motivational factors outside an individual that stimulate a desire or energy to undertake a specific action or achieve a goal.

Bernard Bass

A renowned researcher in the field of leadership studies, particularly known for his work on transformational leadership.

Servant Leadership

Servant leadership is a leadership philosophy in which the primary goal of the leader is to serve others, prioritizing the needs of team members and encouraging their development and performance.