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Transcription of this question: 2.The BerkeleyThe Berkeley is a movie theatre owned by Ed Andrews. It shows Old movies and recent independentlyfinanced films. The movies appeal to nichel audiences, which would not be shown at the multi-screencinema complex called The Max located five kilometres away.As a sole trader, Ed’s financial position is deteriorating. Only 40% of films shown at The Berkeleyreturn a small profit. The manager Of The Max phoned Ed two months ago and offered to takeoverThe Berkeley. Ed politely refused.Cinema attendance has declined and Ed is aware that technology is changing people’s viewinghabits. Recent releases Of Old movies on DVD and the lower price Of home cinema systems toshow these movies have led evening attendances to fall dramatically Ed has calculated thecross-elasticity Of demand for movie tickets, in relation to the price Of these DVDs_ He found thatmovie attendance at The Berkeley and DVD releases were very close substitutes.Ed has just been offered a chance to be the first cinema in the region to show the second film”Film X”, Of a young filmmaker called Judd Peterson. Judd’s previous movie had been ahuge success. The potential demand for his “Film X” is so high that it would be shown twice atthis premiere but Ed must guarantee a target profit of USSI Ed anticipates selling all ticketsat both showings.Ed has prepared some figures for his break-even analysis if he shows “Film X”:• capacity Of The Berkeley = 1200 per showingprice Of movie ticket = USSI 2• fixed costs = USS12000 (this includes target profit of USSIOOOO) to be split equally over the2 showings• variable costs per ticket sold = USS6.Ed has a dilemma: if “Film X” is successful, The Berkeley will receive a substantial revenueboost as well as free publicity This could also help Ed bring more diverse films to The Berkeley,especially little known international films, which would fulfil a long-held ambition Of his.However, if he shows “Film X”, Ed risks changing the perception Of customers that The Berkeleyprovides films for a niche market to a perception that it provides films for a mass-market2. He isconcerned that customers would expect similar movies in the future.(Question 2 continued)(b)(c)(i)(ii)(i)(ii)(iii)Identify two characteristics of a sole trader.Define the term cross-elasticity of demand.Prepare a fully labelled break-even chart for The Berkeley for one showingof “Film X” at the premiere.Calculate the total profit Of The Berkeley if it shows “Film X” twice andcomment on your results.Using The Boston Consulting Group (BCG) matrix, explain two reasonsfor the manager Of The Max decision to Offer to takeover The Berkeley.Analyse the relative importance Of driving and restraining forces onThe Berkeley if Ed decides to show “Film X”[2 marks][2 marks][6 marks][3 marks][6 marks][6 marks]

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