Foundations of Economics (8th Edition)
8th Edition
ISBN: 9780134486819
Author: Robin Bade, Michael Parkin
Publisher: PEARSON
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Chapter 17, Problem 6MCQ
To determine
To choose:
The correct option on the situation when one firm advertises, and other firms don't advertise in the market.
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A publisher has the following table of demand for the next novel by one of its famous authors:
Price
Number of novel in demand
100
0
90
1
80
2
70
3
60
4
50
5
40
6
30
7
20
8
10
9
0
10
The author is paid $2 to write the book (Fixed Cost or FC) and the marginal cost (MC) of publishing it is a constant $10 per book.
a) Calculate the total revenue, total cost, and corresponding profits for each quantity. What quantity would a profit-maximizing publisher choose? What price would he set?
b) Calculate marginal revenue. How does marginal revenue compare to price? Explain.
c) Plot the marginal revenue (MR), marginal cost (MC), and demand (D) curves. At what quantity do the marginal revenue and marginal cost curves intersect? What does this mean?
d) Obtain the economic profits (EP) of this monopolist and graph.
MIcro:
The company “Mike Broonie” operates in the market of monopolistic competition. Just now, the company weekly produces and sells 100 units of pillows for £12 each. The average total cost to produce the pillows doesn’t depend on the output, being £10 per unit. Having evaluated the price elasticity of demand for its product, the company concluded that demand is inelastic at the moment.
a. What indicator characterizes the price elasticity of demand? What formula (or formulas) one can use to calculate this indicator? Choose any number for this indicator that, under the conditions specified in the case, could characterize the price elasticity of demand for the company “Mike Broonie”.
b. Imagine that the owner of the company wants to increase the price of the company’s product. How will it affect sales, revenue, and profit (will each of these indicators increase, decrease, or remain the same)? Give here theoretically substantiated forecast. To increase the number of points…
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?
Chapter 17 Solutions
Foundations of Economics (8th Edition)
Ch. 17 - Prob. 1SPPACh. 17 - Prob. 2SPPACh. 17 - Prob. 3SPPACh. 17 - Prob. 4SPPACh. 17 - Prob. 5SPPACh. 17 - Prob. 6SPPACh. 17 - Prob. 7SPPACh. 17 - Prob. 8SPPACh. 17 - Prob. 9SPPACh. 17 - Prob. 10SPPA
Ch. 17 - Washtenaw Dairy in Ann Arbor, Michigan, sells 63...Ch. 17 - Prob. 2IAPACh. 17 - Prob. 3IAPACh. 17 - Prob. 4IAPACh. 17 - Prob. 5IAPACh. 17 - Use the following information to work Problems 5...Ch. 17 - Prob. 7IAPACh. 17 - Prob. 8IAPACh. 17 - Prob. 9IAPACh. 17 - Prob. 1MCQCh. 17 - Prob. 2MCQCh. 17 - Prob. 3MCQCh. 17 - Prob. 4MCQCh. 17 - Prob. 5MCQCh. 17 - Prob. 6MCQCh. 17 - Prob. 7MCQ
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- Consider the market for electricity. There is only one provider of electricity in the market. Use the given information to answer questions 1. The firm maximizes profit, how much is the MR? 2. How much is the maximized profit? 3. The demand for electricity increases since people use air-conditioners more often.(i) What happens to the demand curve? (ii) Will the firm’s profit increase or decrease? 4. Explain why the market for electricity may be dominated by one firm.arrow_forwardThe following table shows revenue, costs, and profits, where quantities are in thousands, and total revenue, total cost, and profit are in millions of dollars: Find the profit maximizing price and quantity. Price Quantity (1,000s) Total Revenue Marginal Revenue Total Cost Profit $ 100 0 $ 0 ---- $ 2 $ -2 90 100 9 $ 9 3 6 80 200 16 7 4 12 70 300 21 5 5 16 60 400 24 3 6 18 50 500 25 1 7 18 40 600 24 -1 8 16 30 700 21 -3 9 12 20 800 16 -5 10 6 10 900 9 -7 11 -2 0 1,000 0 -9 12 -12arrow_forwardThe graph depicts the demand curve before advertising, DO, and the four possible demand curves that results from advertising. Which of the four demand curves depicts the two ways that advertising impacts demand?- D1 - D2 - D3 - D4arrow_forward
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