The ‘exclusive’ Harvey Davidson Motorbike Club in Knox currently has 1000 members but is planning on a membership drive to increase this number significantly using two strategies 1 and 2, and needs to determine the optimal membership level under each strategy.
A. Before considering the effects of the proposed agreement with the RACV under Strategy 1 or the marketing campaign under Strategy 2, calculate the marginal cost for Harvey Davidson Motorbike Club. (1 mark) Calculate its optimal membership and profit level. (2 Marks)
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B. Will the partnership agreement with RACM affect the optimal membership level? (1 Mark) Calculate optimal (profit maximising) membership and profit levels under strategy 1. (2 Marks)
C. Will the advertising cost under strategy 2 affect the optimal membership level? (1 Mark) Calculate optimal (profit maximising) membership and profit levels under strategy 2. (2 Marks)
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