Based on market research, a film production company in Ectenia obtains the following information about the demand and production costs of its new DVD: Demand: P= 1000 - 10Q Total Revenue: TR = 1000 Q - 10Q2 Marginal Revenue: Marginal Cost: Where Q indicates the number of copies sold and P is the price in Ectenian dollars MR = 1000 - 20Q MC = 100 + 10Q 1. Find the price and quantity that maximize the company's profit. 2. Find the price and quantity that would maximize social welfare. 3. Calculate the deadweight loss from monopoly. 4. Suppose now that in addition to the costs above, the director of the film has to be paid. How does your answer to part a) change if the director is promised a flat fee of 2000 Ectenian dollars? 5. Like part d), but now assume the director gets 50% of all of the revenue instead of the flat fee. How does your answer to part a) change?
Based on market research, a film production company in Ectenia obtains the following information about the demand and production costs of its new DVD: Demand: P= 1000 - 10Q Total Revenue: TR = 1000 Q - 10Q2 Marginal Revenue: Marginal Cost: Where Q indicates the number of copies sold and P is the price in Ectenian dollars MR = 1000 - 20Q MC = 100 + 10Q 1. Find the price and quantity that maximize the company's profit. 2. Find the price and quantity that would maximize social welfare. 3. Calculate the deadweight loss from monopoly. 4. Suppose now that in addition to the costs above, the director of the film has to be paid. How does your answer to part a) change if the director is promised a flat fee of 2000 Ectenian dollars? 5. Like part d), but now assume the director gets 50% of all of the revenue instead of the flat fee. How does your answer to part a) change?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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