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Running head: RUBY RED FINAL REPORT 1 Ruby Red Final Report Columbia Southern University Principles of Microeconomics Doctor Abdulhamid Sukar April 9, 2021

RUBY RED FINAL REPORT 2 Table of Contents Description Pages Introduction 3 Specialization or None 3 - 4 Pricing Structure and Supply and Demand 4 - 7 Threat of Bankruptcy 7 - 9 Number of Workers 10 - 11 Closing the Concession Stand 11 - 12 Marketing 12 - 14 General Information 14 - 15 References 16 Appendix 17 - 28

RUBY RED FINAL REPORT 3 Ruby Red Final Report Introduction Economics is the study of how people use their scarce resources to satisfy their unlimited wants (McEachern, 2019). One part of economics examines individual people or companies instead of the government. This part is called microeconomics which studies the decisions made by people and businesses regarding the allocation of resources, and prices at which they trade goods and services and focuses on supply and demand and other forces that determine price levels in the economy (Potters, 2021). The following is an assessment for Ruby Red Movie Theater. Ruby Red Movie Theater is one of four movie theaters in town. Tracy, who is the manager, has need of some advice on certain aspects of the business. These include whether to have employees specialize or not and what prices to charge for movie tickets and concession stand items. After the movie theater has solved these problems, it has encountered a time of declining sales. Tracy wants to know what can be done to keep the movie theater in operation. Should the concession stand be closed? How many workers should man the ticket booth and concession stand to make it profitable and also to maximizes profits? Once these problems are solved, she needs some advice on marketing strategy. Specialization or None Tyson and Ella are employees at Ruby Red Movie Theater working in the concession stand. Tyson can produce 100 bags of popcorn or 50 hot dogs in one hour. His coworker, Ella, can produce 100 bags of popcorn or 30 hot dogs in an hour. The question here was to have each employee specialize in a product or have each employee produce both.

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RUBY RED FINAL REPORT 4 If each employee produces both products, each employee would produce half of what can be produced in an hour. Therefore, Tyson would produce 50 bags of popcorn and 25 hot dogs per hour. Ella would also produce 50 bags of popcorn but only 15 hot dogs per hour. This would be a total of 1oo bags of popcorn plus 40 hot dogs in an hour. With specialization, one has to take into consideration opportunity cost. The opportunity cost of the chosen item or activity is the value of the best alternative that is given up (McEachern, 2019). For every bag of popcorn Tyson made, he would give up .5 hot dog. For every bag of popcorn Ella made, she would give up .3 hot dog. For every hot dog Tyson made, he would give up 2 bags of popcorn. For every hot dog Ella made, she would give up 3.3 bags of popcorn. With specialization, a person should specialize in the product with the least opportunity cost. In this case, Tyson should specialize in hot dogs and Ella should specialize in popcorn. Specialization should be done because with specialization there would be 100 bags of popcorn and 50 hot dogs made per hour as compared to 100 bags of popcorn and 400 hot dogs made per hour which would be more efficient. Pricing Structure and Supply and Demand The movie theater is concerned with maximizing profits. Therefore, the movie theater would like to know the equilibrium price and quantity of movie tickets and concession items. Also, the movie theater manager has seen a dramatic decrease in the quantity of movie tickets and concession items purchased over the last year. The manager is interested in knowing what the factors are that could cause the supply and demand curves to shift. First, a look at the effect of different prices and quantities of tickets and concession stand items. An analysis is done regarding total utility and marginal utility. Total utility is the total satisfaction a person derives from consumption and marginal utility is the change in the total

RUBY RED FINAL REPORT 5 utility from a one-unit change in a person’s consumption of a good (McEachern, 2019). Tables A1 and A2 in the appendix shows the data for total utility and marginal utility for movie tickets and concession stand items. This data is based in a price for movie tickets of $10.00 and an average price for concession stand items at $15.00 per item. The law of diminishing marginal utility states that the more of a good a person consumes per period, the smaller the increase in total utility from consuming one more unit, other things constant (McEachern, 2019). As can be seen from these tables, the marginal utility diminishes on both items. This data is used to obtain the marginal utility per dollar for each item at each price. By seeing where the marginal utility per dollar is the same for each item, the maximum satisfaction in number of movie tickets and concession stand items can be witnessed at this point. Tables A3 and A4 show the same information for a different price for movie tickets and a different average price for concession stand items. To obtain the equilibrium price and quantity of movie tickets and concession items, one must take into consideration the law of supply and demand. The law of supply and demand is a theory that relates buyers and sellers regarding the price a seller puts on a given good or product and the willingness of people to buy it (Fernando, 2020). This involves analyzing supply and demand curves. A supply curve shows the relation between price of a good and the quantity producers are willing and able to sell per period, other things constant (McEachern, 2019). As can be seen in table A5, Ruby Red Movie Theater supplies 1600 tickets regardless of price. As can be seen in graph A3, the supply curve is vertical at quantity 1600. This is due to the fact that the theater has a fixed amount of tickets for every price range. However, there is a problem.

RUBY RED FINAL REPORT 6 According to the law of diminishing marginal utility, the maximum satisfaction of any product is reached when the marginal utility reaches 0. As can be seen in table A1, the marginal utility reaches 0 at a quantity of 1400 movie tickets being sold. Therefore, no more than 1400 tickets should be produced. Hence, the problem since the theater produces 1600 tickets. In this case the supply curve has to shift to the left to the 1400 quantity as seen in graph A5. The supply of concession stand items can be seen in table A6. This table shows that the supply goes from 500 items at an average price of $1,00 to 2900 items at an average price of $13.00. As seen in graph A4, the supply curve for the concession stand items sloped upward from 500 at an average price of $1.00 to 2900 at an average price of $13.00. This is normal because any company that exists will make more of a product at a higher price that it will at a lower price. “From the seller's perspective, the opportunity cost of each additional unit that they sell tends to be higher and higher and producers supply more at a higher price because the higher selling price justifies the higher opportunity cost of each additional unit sold” (Fernando, 2020, para. 4). A demand curve shows the relation between the price of a good and the quantity consumers are willing and able to buy per period, other things constant (McEachern, 2019). To make a demand curve, two points are needed. These points are obtained from tables A1 through A4. As previously stated, by seeing where the marginal utility per dollar is the same for each item, the maximum satisfaction in number of movie tickets and concession stand items can be witnessed at this point. From tables A1 and A2, we get these points at 600 tickets at $10.00 and 1000 movie tickets at an average price of $5.00. From tables A3 and A4, we get these points at

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RUBY RED FINAL REPORT 7 1200 concession stand items at an average price of $15.00 and 2400 concession stand items at an average price of $5.00. The demand curve for movie sloped downward from 600 tickets at $10.00 each to 1000 tickets at $5.00 each. The demand curve for concession stand items sloped downward from 1200 tickets at $15.00 each to 2400 tickets at $5.00 each. These curves are in accordance with the law of demand which states that the quantity of a good that consumers are willing and able to buy per period varies inversely, or negatively, with the price, other things equal (McEachern, 2019). A market reaches equilibrium when the quantity demanded equals quantity supplied and equilibrium is accomplished when the supply curve and the demand curve intersect (McEachern, 2019). After analyzing graphs A5 and A6, the equilibrium price and quantity for movie tickets is $4.00 at a quantity of 1400 and $8.50 at a quantity of 2000 for concession stand items. Demand curves can shift in either direction. A shift in the demand curve occurs when consumers’ demand for goods and services changes even though the price did not (Amadeo, 2020). In Ruby Red’s case, the demand curves have shifted to the left because of a decrease in demand. The shift to the left for movie tickets could be cause by the consumer trend of streaming movies over the internet. The shift to the left for concession stand items could be from personal taste regarding the desire to watch one’s weight. However, one common cause for both curves to shift to the left could be from people earning less money and cannot afford to go out. Threat of Bankruptcy Ruby Red Movie Theater is in jeopardy of having to close its doors because it is unable to generate enough total revenue. In an effort to generate more revenue, the movie theater manager decided to change the prices this month for drinks, popcorn, candy, hot dogs, and movie

RUBY RED FINAL REPORT 8 tickets. The manager would like the data that has been collected to be analyzed to help decide if the decisions to change the prices were correct or, if not, what should be done to prices to generate more total revenue. The first thing to do is analyze the price elasticity of demand for concession stand items. The price elasticity of demand measures, in a standardized way, how responsive consumers are to a change in price (McEachern, 2019). The price elasticity formula is the percentage change in quantity demanded divided by the percentage change in price with the average quantity and the average price being used as bases for computing percentage changes in quantity and in price (McEachern, 2019). Table A12 gives the data to make these calculations. After doing the calculations, price elasticity of demand for large drinks is -.814. The price elasticity of demand for large popcorn is -3.312. The price elasticity of demand for small drinks is -.290. The price elasticity of demand for small popcorn is -2.928. The price elasticity of demand for candy is -1.32. The price elasticity of demand for hot dogs is .576. The price elasticity of demand for movie tickets is -2.944. The next thing is to determine if these items have elastic, unit, or inelastic demand. This is determined by the absolute value of the price elasticity of demand. Inelastic demand means that the change in price has relatively little effect on quantity demanded and the resulting price elasticity has an absolute value less than 1.0 (McEachern, 2019). Unit elastic demand means that the percentage change in quantity demanded equals the percentage change in price and the resulting price elasticity has an absolute value of 1.0 (McEachern, 2019). Elastic demand means that a change in price has a relatively large effect on quantity demanded and the resulting price elasticity has an absolute value exceeding 1.0 (McEachern, 2019). Therefore, large popcorn,

RUBY RED FINAL REPORT 9 small popcorn, candy, and movie tickets have an elastic demand. Small drinks and hot dogs have an inelastic demand. To determine if the decision to change price was correct, the demand elasticity is compared to the increase or decrease in price. Table A13 gives the general rules of thumb regarding demand elasticity and a price change with the resulting effect on revenue. Therefore, the price change decisions on large popcorn, small popcorn, candy, and movie tickets were inappropriate. The price change decision on small drinks and hot dogs were appropriate. The fact that a new firm is relocating to the city and adding a large number of above average salaries will have an effect on the movie theater. The first thing to do is analyze the income elasticity of demand for movie tickets. The income elasticity of demand measures how responsive demand is to a change in consumer income (McEachern, 2019). The income elasticity of demand is found by dividing the percentage change in demand by the percentage change in consumer income (McEachern, 2019). Table A11 gives the data to make this calculation. After doing the calculations, the income elasticity of demand for movie tickets is .272. The next thing is to determine if movie tickets are considered to be normal goods or inferior goods. The value of the income elasticity of demand is positive for normal goods and negative for inferior goods (McEachern, 2019). With an income elasticity of demand of .272, movie tickets are normal goods. This means that as the income of consumers goes up, the more consumers demand normal goods. This new firm will increase the average income of the community. The theater will benefit from the increased demand for movie tickets.

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RUBY RED FINAL REPORT 10 Number of Workers Ruby Red Movie Theater has experimented with using different numbers of workers in the concession area of the theater as well as at the ticket counter. In these experiments, Tracy, the manager of the theater, collected data on total number of buckets of popcorn as well as movie ticket sales produced per day. Tracy would like to have the data analyzed to see how many workers she should use each day in the concession stand area for producing popcorn and in the ticket area for producing movie ticket sales. She would also like to know how many buckets of popcorn and movie tickets will be produced/sold by those workers per day. The data for the popcorn produced by the different number of workers is shown in table 14. The data for the movie tickets produced by the different number of workers is shown in table 15. This is the data that will be analyzed to give the requested information. The analysis is based on marginal analysis and, in particular, the law of diminishing marginal returns. The law of diminishing marginal returns states that as more of a variable resource is added to a given amount of other resources, marginal product eventually declines and could become negative (McEachern, 2019). When marginal value product reaches its maximum point, diminishing marginal returns begin. For buckets of popcorn, the law of diminishing marginal returns begins at 6 workers. According to table 14, when 6 workers are present, the marginal product is 350. However, when 8 workers are present, the marginal product is 150. 8 workers causes the marginal product to start to decrease. According to table 15, the law of diminishing marginal returns begins at 2 workers. With 2 workers, the marginal product is 388 but when there are 3 workers, the marginal product is 320. Therefore, when 3 workers are added the marginal product starts to go down.

RUBY RED FINAL REPORT 11 As a result of the analysis, Tracy should have 6 workers in the concession stand producing 750 bags of popcorn a day. She should also have 2 workers in the ticket booth producing 615 movie tickets per day. This would optimize production. Closing the Concession Stand Tracy, the manager at Ruby Red Movie Theater, is extremely worried about concession stand sales. Tracy has indicated that she is at a loss regarding how many employees should be working in the concession stand area and how many concession stand items should be sold per day. Tracy is even considering closing the concession stand area. To help keep the concession stand open, it must make a profit. Therefore, the optimal number of workers and the number of items that should be sold daily need to be figured out. The way to do this is by analyzing data regarding number of workers and the output they produce along with the resulting profit or loss. Table A7 gives the financial data needed for this analysis. For any firm to stay open it must have enough revenue to cover the costs of operating the business in the short run. There are two types of cost in the short run, which are fixed and variable. “Variable costs vary with the amount of output produced, and fixed costs remain the same no matter how much a company produces” (Nickolas, 2021, para. 1). When these two costs are added together, a company realizes the total cost of running the business in the short run. The total revenue collected must be able to cover this total cost. To make a profit, the total revenue must be more than this total cost. In analyzing table A7, profit is witnessed when there are 4 workers per day producing 400 items. The total revenue collected is #3,200 as compared to the total operating cost of $2,480. This results in a profit of $720 a day. This is the minimal number of workers and items

RUBY RED FINAL REPORT 12 produced per day to keep the concession stand open. As can be seen from table A7, when there are 2 workers producing 100 items per day, the results is a loss of $1,440 a day. However, every business wants to maximize its profits. According to table A7, Ruby Red Movie Theater could have either 16 workers per day producing 1,250 items or 18 workers per day producing 1,280 items. In both instances the resulting profit is $6,080 per day. However, to truly maximize profits, the marginal revenue must equal the marginal cost at the particular level. According to table A7, this occurs when 18 workers are producing 1,280 items. Therefore, to maximize its concession stand profits, Ruby Fred Theatre should have 18 concession stand workers producing 1,280 items per day. Marketing Ruby Red Theater is now starting to work on its marketing plan to draw more customers into the theater. Tracy, the manager, has provided information on Ruby Red Movie Theater and its three competitors, which are Grayson's Guild, Ryne's Reel 2 Reel, and Garrett's Dollar Movies. This information includes average ticket prices, operating hours, and average number of tickets sold. This data is shown in table A8, table A9, and table A10. She has also stated that Grayson's Guild and Ryne's Reel 2 Reel offer a special "Two-for-One Tuesday" where you can purchase two tickets for the price of one and both theaters have just purchased the latest Goldby Surround Sound for their movie theaters. The first thing is to determine the market structure of the movie industry in the town. Table A11 describes the characteristics of the different market structures. Although there are some similarities to perfect competition, monopoly, and monopolistic competitive market structure, when comparing the market to the characteristics in table A11, the market structure that fits the industry is oligopoly. There are only four movie theaters selling differentiated

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RUBY RED FINAL REPORT 13 products. They each have a relatively average share of the market and can set their own prices. There is an extreme barrier to entry of other firms since the city has passed a law banning any other movie theaters from building within the city limits. Therefore, long-term economic profit is a possibility for the four theaters. There are several marketing ideas that Tracy should consider. The first has to do with price. She should match the price of $8.00 that Grayson’s Guild Movie Theater and Ryne’s Reel 2 Reel Movie Theater charges as depicted in table A8. However, she should not go any lower since that may start a price war in which nobody wins. However, in an oligopoly, firms often compete on non-price competition which makes other offerings important (Pettinger, 2019). Therefore, she should change her opening time to match the opening time of 10:00 a.m. for Grayson’s Guild Movie Theater and Ryne’s Reel 2 Reel Movie Theater as depicted in table A9. She should also match the "Two-for-One Tuesday" offer by Grayson’s Guild Movie Theater and Ryne’s Reel 2 Reel Movie Theater but on a different day. Finally, she should also purchase a competitive surround sound system for the theater. However, it is reported that Grayson’s Guild Movie Theater has made an offer to purchase Ryne’s Reel 2 Reel Movie Theater. The merger would result in both theaters operating under the same business ownership. This could have an effect on Ruby Red Movie Theater. It could mean that Grayson’s Guild Movie Theater could establish more power in determining price and other features required to remain competitive. In the long run, this could cause Ruby Red Movie Theater to close its doors. However, the government could have issues with this merger. According to the Federal Trade Commission (n.d.), “Section 7 of the Clayton Act prohibits mergers and acquisitions when the effect may be substantially to lessen competition, or to tend to create a monopoly” (para. 2).

RUBY RED FINAL REPORT 14 In this case, the merger would definitely effect competition and could be a sign that Grayson’s Guild Movie Theater is trying to form a monopoly. General Information The world is built around supply and demand. In markets for goods and services, households are the demanders for goods and services that maximize their satisfaction and firms are the suppliers of the goods and services that maximize profit (McEachern, 2019). In order to produce the goods or services, many different resources come into play. Different people, sources of materials, and even technology are involved. If the individual consumer would try and bring all of this together, it would be a monumental and costly task. It is better and more efficient to organize all of these activities through a firm. Therefore, firms came into being to make it easier and less costly to get work done. Ruby Red Movie Theater came into existence to facilitate people being able to watch a movie while enjoying their favorite beverage and snack. Outsourcing occurs when a firm buys products or services from outside suppliers. Firms outsource to reduce the cost of producing the good or service and to have the ability to concentrate on what it can produce more efficiently and cost effective. In Ruby Red’s case, the theater outsources the acquisition of movies and certain concession stand items. This allows it to concentrate on selling tickets and producing concession stand items that need to be fresh such as popcorn. Vertical integration is the expansion of a firm into stages of production earlier or later than those in which it specializes (McEachern, 2019). A company can experience vertical integration by acquiring a company that is involved in the production process of the same industry (Tarver, 2021).. Two major factors for vertical integration are to reduce the cost of

RUBY RED FINAL REPORT 15 producing the good or service and increasing profit. Ruby Red Movie Theater could experience vertical integration by acquiring a company that produces movies to show in the theater. Another form of integration is horizontal. Horizontal integration occurs when one firm increases production of a good or service through internal expansion, acquisition of another firm, or a merger with another firm within the same industry that offers the same level of product or service (McEachern, 2019). This is what Grayson’s Guild Movie Theater is trying to do with the offer to purchase Ryne’s Reel 2 Reel Movie Theater.

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RUBY RED FINAL REPORT 16 References Federal Trade Commission. (n.d.). Mergers . Retrieved from https://www.ftc.gov/tips-advice/competition-guidance/guide-antitrust-laws/mergers Fernando, J. (2020). Law of supply and demand . Retrieved from https://www.investopedia.com/terms/l/law-of-supply-demand.asp McEachern, W. A. (2019). Micro ECON6: Principles of microeconomics . Cengage Learning. https://online.vitalsource.com/#/books/9781337671828 Nickolas, S. (2021). Variable cost vs. fixed cost: What's the difference? Retrieved from https://www.investopedia.com/ask/answers/032515/what-difference-between-variable- cost-and-fixed-cost-economics.asp#:~:text=Variable%20costs%20vary%20based%20on, %2C%20insurance%2C%20and%20interest%20payments. Pettinger, T. (2019). Oligopoly . Retrieved from https://www.economicshelp.org/microessays/markets/oligopoly/ Potters, C. (2021). Microeconomics vs. macroeconomics: What's the difference? Retrieved from https://www.investopedia.com/ask/answers/difference-between-microeconomics-and- macroeconomics/ Tarver, E. (2021). Horizontal vs. vertical integration: What's the difference? Retrieved from https://www.investopedia.com/ask/answers/051315/what-difference-between-horizontal- integration-and-vertical-integration.asp

RUBY RED FINAL REPORT 17 Appendix

RUBY RED FINAL REPORT 18 Table A1: Marginal utility and marginal utility per dollar for movie tickets. Quantity of Tickets Consumed Total Utility Marginal Utility Movie Ticket Price Marginal Utility Per Dollar for Movie Tickets 0 0 --- --- --- 200 150 150 $10.00 15 400 275 125 $10.00 12.5 600 375 100 $10.00 10 800 450 75 $10.00 7.5 1,000 500 50 $10.00 5 1,200 525 25 $10.00 2.5 1,400 525 0 $10.00 0 Table A2: Marginal utility and marginal utility per dollar for concession stand items. Quantity of Concession Stand Items Consumed Total Utility Marginal Utility Average Item Price Marginal Utility Per Dollar for Concession Items 0 0 --- --- --- 400 200 200 $15.00 13.33 800 375 175 $15.00 11.67 1,200 525 150 $15.00 10 1,600 650 125 $15.00 8.33 2,000 750 100 $15.00 6.67 2,400 825 75 $15.00 5 2,800 875 50 $15.00 3.33

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RUBY RED FINAL REPORT 19 Table A3: Marginal utility and marginal utility per dollar for movie tickets (Revised). Quantity of Tickets Consumed Total Utility Marginal Utility Movie Ticket Price Marginal Utility Per Dollar for Movie Tickets 0 0 --- --- --- 200 150 150 $5.00 30 400 275 125 $5.00 25 600 375 100 $5.00 20 800 450 75 $5.00 15 1,000 500 50 $5.00 10 1,200 525 25 $5.00 5 1,400 525 0 $5.00 0 Table A4: Marginal utility and marginal utility per dollar for concession stand items (Revised). Quantity of Concession Stand Items Consumed Total Utility Marginal Utility Average Item Price Marginal Utility Per Dollar for Concession Items 0 0 --- --- --- 400 200 200 $5.00 40 800 375 175 $5.00 35 1,200 525 150 $5.00 30 1,600 650 125 $5.00 25 2,000 750 100 $5.00 20 2,400 825 75 $5.00 15 2,800 875 50 $5.00 10

RUBY RED FINAL REPORT 20 Table A5 : Movie Ticket Prices and Quantity Supplied Movie Ticket Price Quantity Supplied of Movie Tickets $2 1,800 $3 1,800 $4 1,800 $5 1,800 $6 1,800 $7 1,800 $8 1,800 $9 1,800 $10 1,800 $11 1,800 $12 1,800 $13 1,800 $14 1,800 $15 1,800 Table A6: Concession Stand Item Prices and Quantity Supplied Average Concession Stand Price Quantity Supplied of Concession Stand Items $1 500 $2 700 $3 900 $4 1,100 $5 1,300 $6 1,500 $7 1,700 $8 1,900 $9 2,100 $10 2,300 $11 2,500 $12 2,700 $13 2,900

RUBY RED FINAL REPORT 21 Table A7: Levels of output for concession stand items Round These Answers to the Nearest Whole Number Round These Answers to the Nearest Penny Output (Concessio n Stand Items) Number of Workers Employed Per Day Price of Labor Per Worker Per Day Total Variable Cost of Labor Total Fixed Costs Per Day Total Cost Per Day Average Price of Concession Stand Items Total Revenue Profit Average Variable Cost Average Fixed Cost Average Total Cost Marginal Cost Margina l Revenue 0 0 $120 $0 $2,000 $2000 $8.00 $0 -$2000 --- --- --- --- $8.00 100 2 $120 $240 $2,000 $2240 $8.00 $800 -$1440 $2.40 $20.00 $22.40 $2.40 $8.00 400 4 $120 $480 $2,000 $2480 $8.00 $3200 $720 $1.20 $5.00 $6.20 $0.80 $8.00 750 6 $120 $720 $2,000 $2720 $8.00 $6000 $3280 $0.96 $2.67 $3.63 $0.69 $8.00 900 8 $120 $960 $2,000 $2960 $8.00 $7200 $4240 $1.07 $2.22 $3.29 $1.60 $8.00 1,025 10 $120 $1200 $2,000 $3200 $8.00 $8200 $5000 $1.17 $1.95 $3.12 $1.92 $8.00 1,125 12 $120 $1440 $2,000 $3440 $8.00 $9000 $5560 $1.28 $1.78 $3.06 $2.40 $8.00 1,200 14 $120 $1680 $2,000 $3680 $8.00 $9600 $5920 $1.40 $1.67 $3.07 $3.20 $8.00 1,250 16 $120 $1920 $2,000 $3920 $8.00 $10000 $6080 $1.54 $1.60 $3.14 $4.80 $8.00 1,280 18 $120 $2160 $2,000 $4160 $8.00 $10240 $6080 $1.69 $1.56 $3.25 $8.00 $8.00 1,290 20 $120 $2400 $2,000 $4400 $8.00 $10320 $5920 $1.86 $1.55 $3.41 $24.00 $8.00 1,289 22 $120 $2640 $2,000 $4640 $8.00 $10312 $5672 $2.05 $1.55 $3.60 -$240.00 $8.00 1,280 24 $120 $2880 $2,000 $4880 $8.00 $10240 $5360 $2.25 $1.56 $3.81 -$26.67 $8.00

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RUBY RED FINAL REPORT 22 Table A8: Average Ticket Price Movie Theater Average Ticket Price Ruby Red Movie Theater $10.00 Grayson’s Guild Movie Theater $8.00 Ryne’s Reel 2 Reel Movie Theater $8.00 Garrett’s Dollar Movies $1.00 Table A9: Starting Times Movie Theater First Start Time Last Start Time Ruby Red Movie Theater 12:00 noon 11:00 p.m. Grayson’s Guild Movie Theater 10:00 a.m. 11:00 p.m. Ryne’s Reel 2 Reel Movie Theater 10:00 a.m. 11:00 p.m. Garrett’s Dollar Movies 12:00 noon 11:00 p.m. Table A10: Average Monthly Ticket Sales Movie Theater Average Monthly Movie Ticket Sales Ruby Red Movie Theater 15,000 Grayson’s Guild Movie Theater 23,000 Ryne’s Reel 2 Reel Movie Theater 25,750 Garrett’s Dollar Movies 25,200 Table A11: Market Structure Type Characteristic Perfect Competition Monopolistic Competition Oligopoly Monopoly Number of Firms Vast Many Few Dominant Firms One Type of Product Homogeneous Differentiated Differentiated Unique, Limited, No Close Substitute Size of Firm Relatively Small Relatively Small Average to Large Large Market Share Small Small Average/High Absolute Barriers to Entry and Exit None Low High Extreme Price-Setting Power None, Price Taker Low, Price Maker High, Price Maker High, Price Maker Long-Run Economic Profits None None Possible Possible

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RUBY RED FINAL REPORT 23 Table A11 : Community Average Income versus Movie Tickets Sold Last Year This Year Community’s Average Income $55,800 $57,474 Movie Ticket Sales 4,980 5,021 Table A12: Change in Pricing Price Quantity Demanded Item Last Month This Month Last Month This Month Large Drink $6.00 $5.50 150 161 Large Popcorn $7.50 $8.00 125 101 Small Drink $2.50 $2.00 75 80 Small Popcorn $5.00 $5.25 45 39 Candy $4.00 $3.50 57 68 Hot Dog $5.00 $5.25 35 36 Movie Ticket $8.00 $9.00 428 300 Table A13: Rules of Thumb Rules of Thumb Elastic Demand Increase Price Decrease Total Revenues Elastic Demand Decrease Price Increase Total Revenues Inelastic Demand Increase Price Increase Total Revenues Inelastic Demand Decrease Price Decrease Total Revenues

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RUBY RED FINAL REPORT 24 Table A14: Data on Concession Items Produced Number of Workers per Day Concessio n Items Produced per Day Average Product Margina l Product Average Price of Concessi on Items Total Value Product Average Value Product Marginal Value Product Price of Worker per Day 0 0 0 0 $8.00 0 0 0 $120.00 2 100 50.00 100 $8.00 $800 $400 $800 $120.00 4 400 100.00 300 $8.00 $3200 $800 $2400 $120.00 6 750 125.00 350 $8.00 $6000 $1000 $2800 $120.00 8 900 112.50 150 $8.00 $7200 $900 $1200 $120.00 10 1,025 102.50 125 $8.00 $8200 $820 $1000 $120.00 12 1,125 93.75 100 $8.00 $9000 $750 $800 $120.00 14 1,200 85.71 75 $8.00 $9600 $686 $600 $120.00 16 1,250 78.13 50 $8.00 $10000 $625 $400 $120.00 18 1,280 71.11 30 $8.00 $10240 $569 $240 $120.00 20 1,290 64.50 10 $8.00 $10320 $516 $80 $120.00 22 1,290 58.63 0 $8.00 $10320 $469 $0 $120.00 24 1,280 53.33 -10 $8.00 $10240 $427 -$80 $120.00

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RUBY RED FINAL REPORT 25 Table A15: Data on Movie Tickets Produced Number of Workers per Day Movie Tickets Produced per Day Average Product Margin al Product Average Price of Movie Tickets Total Value Product Average Value Product Marginal Value Product Pric Work Da 0 0 0 0 $10.00 0 0 0 $120 1 227 227.00 227 $10.00 $2270 $2270 $2270 $120 2 615 307.50 388 $10.00 $6150 $3075 $3880 $120 3 935 311.67 320 $10.00 $9350 $3117 $3200 $120 4 1,185 296.25 250 $10.00 $11850 $2963 $2500 $120 5 1,427 285.40 242 $10.00 $14270 $2854 $2420 $120 6 1,631 271.83 204 $10.00 $16310 $2718 $2040 $120 7 1,788 255.43 157 $10.00 $17880 $2554 $1570 $120 8 1,800 225.00 12 $10.00 $18000 $2250 $120 $120 9 1,800 200.00 0 $10.00 $18000 $2000 $0 $120 10 1,789 178.90 -11 $10.00 $17890 $1789 -$110 $120 11 1,757 159.73 -32 $10.00 $17570 $1597 -$192 $120 12 1,679 139.92 -78 $10.00 $16790 $1399 -$780 $120

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