At ultrinsic, students pay a small entry fee to compete in grades-based contests for cash prizes. suppose that 10 students from your economics class each pay $10 to enter a grades-based contest. this would create a $100 prize pool. an equal share of the $100 pot is awarded at the end of the term to each contestant who earns an a in the course. if four students earn a’s, each receives $25. if only one student earns an a, that person gets the entire $100 pot. what economic concept does ultrinsic use to encourage participants to learn more and get better grades?

You are the owner of a local honda dealership. unlike other dealerships in the area, you take pride in your “no haggle” sales policy. last year, your dealership earned record profits of $1.5 million. however, according to the local chamber of commerce, your earnings were 10 percent less than either of your competitors. in your market, the price elasticity of demand for midsized honda automobiles is 4.5. in each of the last five years, your dealership has sold more midsized automobiles than any other honda dealership in the nation. this entitled your dealership to an additional 30 percent off the manufacturer’s suggested retail price (msrp) in each year. taking this into account, your marginal cost of a midsized automobile is $11,000. what price should you charge for a midsized automobile if you expect to maintain your record sales?