A market maker faces the following demand and supply for widgets. Eleven buyers are willing to buy at the following prices: $15, $14, $13, $12, $11, $10, $9, $8, $7, $6, $5. Eleven sellers are also willing to sell at the same prices. If the market maker bought and sold at the equilibrium price, what is his profit?
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- Figure 12-6 Price (dollars per pound) 5 Market price 4 3 2 0 10 20 30 MC ATC D = MR 40 Quantity (thousands of pounds) Figure 12-6 shows the demand, marginal cost (MC) and average total cost (ATC) curves for Jason's House of Apples. Refer to Figure 12-6. Which of the following statements is true? O Jason cannot earn a profit from selling any number of apples. O Jason should produce where MC equals $3 (point d) where he will maximize his profit. O Jason should produce where MC equals $3 (point d) where he will minimize his losses. Jason should produce where the distance between MC and his demand curve is greatest (point b).You live in a town with 300 Adults and 200 children, and you arc thinking about putting on a play to entertain your neighbors and make some money. A play has a fixed cost of $2,000, but selling an extra ticket has zero marginal cost. Here are the demand schedules for your two types of customer: a. To maximize profit, what price would you charge for an adult ticket? For a child's ticket?How much profit do you make?b. The city council passes a law prohibiting you from charging different prices to different customers. What price do you set for a ticket now? How much profit do you make?c. Who is worse off because of the law prohibiting price discrimination? Who is better off? (If you can, quantify the changes in welfare.)d. If the fixed cost of the play were $2,500 rather than $2,000, how would your answers to parts (a), (b), and (c) change?You make delicious cupcakes that you mail to customers across the country. Your cupcakes are so unique and special that you have a great deal of pricing power. Your customers have identical demand curves for your cupcakes, and a representative customer’s demand curve is shown below. (It’s not needed, but the demand curve equation is P=5-0.2Q or Q=25-5P.) Suppose your MC=$1/cupcake, whether you produce lots or just a few cupcakes. To keep things simple, suppose there are no fixed costs, so FC=0. a) Acting as a monopolist, show the standard pricing analysis on the graph below that identifies your profit-mamximing price and quantity for your representative customer. Shade areas representing your profit and CS. (PS and profit are the same here since FC=0). b) Suppose you offer a quantity discount: first 10 cupcakes at $3 each and any cupcakes over 10 are offered at a discounted price. What discount price will maximize your profit? Show this quantity discount arrangement on your graph…
- The market for full fare tickets (F)! Consider the following simplified scenario. Imagine that the Australian national rugby union (for short, Rugby AU) has exclusive rights to organize the games played by the national team. Rugby AU decides that the next match, between the Wallabies and the All Blacks (i.e., the Australian and the New Zeeland national rugby teams), will be hosted at the Marvel Stadium in Melbourne. Rugby AU has no fixed costs for organizing the game, but it must pay a marginal cost MC of $20 per seat to the owners of the Marvel Stadium. Two types of tickets will be sold for the game: concession and full fare. Based on any official document that attests to their age, children and pensioners qualify to purchase concession tickets that offer a discounted price; everyone else pays the full fare. The demand for full-fare tickets is QF(P) = 120 – 2P. 1e. Suppose that the government is looking to tax Rugby AU to raise revenue for building new sport facilities for kids…The market for full fare tickets (F) : Consider the following simplified scenario. Imagine that the Australian national rugby union (for short, Rugby AU) has exclusive rights to organize the games played by the national team. Rugby AU decides that the next match, between the Wallabies and the All Blacks (i.e., the Australian and the New Zeeland national rugby teams), will be hosted at the Marvel Stadium in Melbourne. Rugby AU has no fixed costs for organizing the game, but it must pay a marginal cost MC of $20 per seat to the owners of the Marvel Stadium. Two types of tickets will be sold for the game: concession and full fare. Based on any official document that attests to their age, children and pensioners qualify to purchase concession tickets that offer a discounted price; everyone else pays the full fare. The demand for full-fare tickets is QF(P) = 120 – 2P. The demand for concession tickets is QC(P) = 80 – 2P. 1. Lump sum tax (LS): Instead of a tax per unit, the government…No written by hand solution Suppose that headphones can be produced at a constant marginal cost. Headphone A is priced at $20 and headphone B is priced at $30. (a) If the Lerner index of headphone A divided by the Lerner index of headphone B is 0.5, what is the marginal cost of producing headphones? (b) Using your answer to part ‘a’, what is the elasticity of demand of headphone A? What is the elasticity of demand of headphone B?
- In mid-2010, Saudi Arabia and Venezuela (both members of OPEC)produced an average of 8 million and 3 million barrels of oil a day,respectively. Production costs were about $20 per barrel, and the price ofoil averaged $80 per barrel. Each country had the capacity to producean extra 1 million barrels per day. At that time, it was estimated that each1-million-barrel increase in supply would depress the average price of oilby $10.a. Fill in the missing profit entries in the payoff table.b. What actions should each country take and why?Venezuela3 M barrels 4 M barrels8 M barrels _____, _____ _____, _____ Saudi Arabia9 M barrels _____, _____ _____, _____c10GameTheoryandCompetitiveStrategy.qxd 9/29/11 1:33 PM Page 430Summary 431c. Does the asymmetry in the countries’ sizes cause them to take differentattitudes toward expanding output? Explain why or why not. Commenton whether or not a prisoner’s dilemma is present.Food prices in sports stadiums are notoriously high because there is a limit on the numberof vendors that can operate in the stadium, which is a barrier to entry. In 2017, the AtlantaFalcons, an American football team, lowered the barriers to entry by allowing more foodvendors into their stadium. If the market for food in the stadium follows our perfect marketassumptions, what might you expect happened after this change? Do not worry about theunderlying facts of each statement, only whether it makes economic sense given our model.(Select one or more.)(a) The price of food in the stadium decreased because of an increase in supply.(b) The price of food in the stadium decreased because of an increase in demand.(c) The quantity of food sold decreased because of a movement of the supply curve.(d) The quantity of food sold increased because of a movement along the demand curve.(e) Profit per vendor decreased because of lower food prices.(f) Profit per vendor increased because of greater…Johnny Rockabilly has just finished recording his latest CD. His record company’smarketing department determines that the demand for the CD is as follows:The company can produce the CD with no fixed cost and a variable cost of $5 per CD.a. Find total revenue for quantity equal to 10,000,20,000, and so on. What is themarginal revenue for each 10,000 increase in the quantity sold?b. What quantity of CDs would maximize profit? What would the price be? What wouldthe profit be?c. If you were Johnny's agent, what recording fee would you advise johnny to demandfrom the record company? Why?
- A publisher faces the following demand schedule for the next novel from one of its popular authors:Price Quantity Demanded100 090 100,00080 200,00070 300,00060 400,00050 500,00040 600,000 530 700,00020 800,00010 900,0000 1,000,000The author is paid $2 million to write the book, and the marginal cost of publishing the book is a constant $30 per book.d. In your graph, shade in the deadweight loss. Explain in words what this means. e. If the author was paid $3 million instead of $2 million to write the book, how would this affectthe publisher’s decision regarding the price to charge? Explain. f. Suppose the publisher was not profit-maximizing but was concerned with maximizing economicefficiency. What price would it charge for the book? How much profit would it make at thisprice? (Jonathan, Scott and Mitchell share a garage. All enjoy having the garage cleaned, regardless of who pays for cleaning. The graph below represents Jonathan, Scott and Mitchell’s individual demand for garage cleaning. The marginal cost of cleaning $3 per hour. The Lindahl prices for Jonathan, Scott and Mitchell are, respectively, $68/17, $17/17, and $4/85 per hour. $34/17, $17/17, and $0 per hour. None of these. $30/17, $15/17, $6/17 per hour. $0, $0, and $0 per hour.Max barbershop is considering raining prices by $5 per haircut. Their current price for a cut is $23 abd babers receive 50% of the revenues for each haircut. Since Max is concerned about demand dropping due to the price increase, he is also planning to start advertising the shop on TV for $895 month. If current fixed cost are $11,576/month the current profit is $2000/month by what percent can demand decrease at the new price level and maintain current levels of profit on the business?