and marginal revenue schedules. (and marginal c and curve and Hot Air's marginal revenue curve. g output and price and calculate the firm's econom on Hot Air's profit, how do its output and price ch fit, the government imposes a sales tax on balloom

ENGR.ECONOMIC ANALYSIS
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Chapter1: Making Economics Decisions
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Hot Air Balloon Rides is a single-price monopoly. Columns 1 and 2 of the table set out the
market demand schedule and columns 2 and 3 set out the total cost schedule.
P (dollars per ride)
Qd (rides per month)
TC (dollars per month)
220
200
1
160
180
260
160
380
140
4
520
120
5
680
a. Construct Hot Air's total revenue and marginal revenue schedules. (and marginal cost
schedule.)
b. Draw a graph of the market demand curve and Hot Air's marginal revenue curve.
c. Find Hot Air's profit-maximizing output and price and calculate the firm's economic
profit.
d. If the government imposes a tax on Hot Air's profit, how do its output and price change?
e. If instead of taxing Hot Air's profit, the government imposes a sales tax on balloon rides of
S30 a ride, what are the new profit-maximizing quantity, price, and economic profit?
Transcribed Image Text:Hot Air Balloon Rides is a single-price monopoly. Columns 1 and 2 of the table set out the market demand schedule and columns 2 and 3 set out the total cost schedule. P (dollars per ride) Qd (rides per month) TC (dollars per month) 220 200 1 160 180 260 160 380 140 4 520 120 5 680 a. Construct Hot Air's total revenue and marginal revenue schedules. (and marginal cost schedule.) b. Draw a graph of the market demand curve and Hot Air's marginal revenue curve. c. Find Hot Air's profit-maximizing output and price and calculate the firm's economic profit. d. If the government imposes a tax on Hot Air's profit, how do its output and price change? e. If instead of taxing Hot Air's profit, the government imposes a sales tax on balloon rides of S30 a ride, what are the new profit-maximizing quantity, price, and economic profit?
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