Principles of Economics 2e
2nd Edition
ISBN: 9781947172364
Author: Steven A. Greenlaw; David Shapiro
Publisher: OpenStax
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Textbook Question
Chapter 10, Problem 19P
Andrea’s Day Spa began to offer a relaxing aromatherapy treatment. The film asks you how much to charge to maximize profits. The first two columns in Table 10.5 provide the
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Andrea's Day Spa began to offer a relaxing aromatherapy treatment. The firm asks you how
much to charge to maximize profits. The demand curve for the treatments is given by the
first two columns in the following table; its total costs are given in the third column. For each
level of output, calculate total revenue, marginal revenue, average cost, and marginal cost.
What is the profit-maximizing level of output for the treatments and how much will the firm
earn in profits?
Price
$25.00 0
$24.00
$23.00
Quantity TC
$21.60
10
$22.50 30
$21.20
20
$22.00 40
50
60
$130
$275
$435
$610
$800
$1,005
$1,225
Total
revenue
Marginal
revenue
Average
cost
Marginal
cost
Andrea's Day Spa began to offer a relaxing aromatherapy treatment. The firm asks you how much to charge to maximize profits. The demand curve for the treatments is given by the first two columns in the following table; its total costs are given in the third column. For each level of output, calculate total revenue, marginal revenue, average cost, and marginal cost. What is the profit-maximizing level of output for the treatments and how much will the firm earn in profits? Your response must include, for each level of output .the total revenue, marginal revenue, average cost, and marginal cost. Then draw your conclusion about the level of output and total the firm will earn in profits? Table of prices = $25,$24,$23,$22.50,$22,$21.60,$21.20 Quantity= 0,10,20,30,40,50,60 TC= $130,$275,$435,$610,$800,$1,005,$1,225 Ty.
IV. Slim City is a town resided by slim people, with no health club in town. LA Fatness has estimated that the
annual demand for their Fatness Club in this town to be Q = 160 - P. Every Club member has a marginal cost of
$40, and the annual fixed cost of the business is $500 (assume a linear cost function).
1. LA Fatness starts the first Fatness Club in town. What is the optimum price and membership quantity?
2. What is the profit of the business at the optimum solution?
3- Observing the potential for profit, Twenty-Eight-Hours Club (T-E-H Club), a competitor of the LA Fatness,
enters the market. T-E-H Club has the same marginal and fixed cost structure as of the LA Fatness and provides a
homogeneous service. is the optimum quantity for the T-E-H Club?
4- What will be the price in market after T-E-H Club enters the market?
Styles Pane
5- Suppose LA Fatness and T-E-H Club continue non-cooperative profit-maximizing strategies in market. Find the
reaction function of the LA Fatness and…
Chapter 10 Solutions
Principles of Economics 2e
Ch. 10 - Suppose that, due to a successful advertising...Ch. 10 - Continuing with the scenario in question 1, in the...Ch. 10 - Consider the curve in the figure below, which...Ch. 10 - Sometimes oligopolies in the same industry are...Ch. 10 - What is the relationship between product...Ch. 10 - How is the perceived demand curve for a...Ch. 10 - How does a monopolistic competitor choose its...Ch. 10 - How can a monopolistic competitor tell whether the...Ch. 10 - If the firms in a monopolistically competitive...Ch. 10 - Is a monopolistically competitive firm...
Ch. 10 - Will the firms in an oligopoly act more like a...Ch. 10 - Does each individual in a prisoners dilemma...Ch. 10 - What stops oligopolists from acting together as a...Ch. 10 - Aside from advertising, how can monopolistically...Ch. 10 - Make a case for why monopolistically competitive...Ch. 10 - Would you rather have efficiency or variety? That...Ch. 10 - Would you expect the kinked demand curve to be...Ch. 10 - When OPEC raised the price of oil dramatically in...Ch. 10 - Andreas Day Spa began to offer a relaxing...Ch. 10 - May and Raj me the only two growers who provide...Ch. 10 - Jane and Bill are apprehended for a bank robbery....
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