Based on market research, a film production company in Ectenia obtains the following information about the demand and production costs of its new DVD:1 Demand: P = 1,000 – 10Q Marginal Revenue: MR = 1,000 – 20Q Marginal Cost: MC = 100 + 10Q a. Find the price and quantity that maximize the company’s profit. b. Find the price and quantity that would maximize social welfare. c. Use a graph to illustrate the DWL and calculate the dollar value of the DWL.
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- Pic 1 : You live in a town with 300 adults and 200 children, and you are 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 customers: Price Adults Children (Dollars) (Tickets) (Tickets) 10 0 0 9 100 0 8 200 0 7 300 0 6 300 0 5 300 100 4 300 200 3 300 200 2 300 200 1 300 200 0 300 200 To maximize profit, you would charge $ ? for an adult's ticket and $ ? for a child's ticket. Total profit in this case would be $ ? The city council passes a law prohibiting you from charging different prices to different customers. Now you set a price of $ ? for all tickets, resulting in $ ? in profit. Pic 2 : Indicate whether each of the following groups of people is better off, worse off, or the same because of the law prohibiting price discrimination.…Scenario Use the following information to answer questions 16-19. The graph below shows the market demand for computers in a small country. To develop a domestic computer industry, the government prohibits imports of computers and gives a single local firm the sole right to produce and sell computers (that is, it is a legal monopoly). The demand curve shows the local demand for computers. The cost curves show the marginal cost (MC) and average total cost (ATC) of the single producer. The graph also shows the marginal revenue (MR) curve faced by this firm. Price per computer (Dollars) $3500 $3000 $2500 $2000 $1500 $1000 $500 0 MR MC.. ATC Demand 10 20 30 40 50 60 70 Quantity of computers (number per year)Economics Use the following information $6.00 Sell 6 million razors Variable cost = $3.00 Price elasticity = -3 Linear demand curve Price for a razor = Now, suppose the cost to produce a blade is $0.25. if you charge $0.35 for a blade, a customer buys an average of 100 blades from you. A profit per blade is $0.10. Assume the price elasticity of demand for blades is -3. What price should you charge for a razor and for a blade? Choose the nearest answer choice. (note: blade profit = razor demand x profit per blade x blade demand) %3D
- The graph below represents sales per week of ABC Inc. Ltd, a monopoly multinational enterprise that supplies Hi-tech components. Use the graph to answer the questions that follow. Suppose the demand and cost curves result in ABC Inc. Ltd earning an economic profit. Do you think ABC Inc. Ltd firm will earn profit in the longrun? Explain your answer. Assume all factors constant. Examine the effects of ABC Inc. Ltd on consumers.Suppose that managers at Honda are deciding how to price the new Honda Accord. The managers estimate that their total costs increase by $20,000 for each car they produce. They also estimate the demand curve they face; it is described by the equation: Q = -0.4 P + 16,000, where Q represents the quantity of Honda Accords they will sell and P represents the price they charge in US dollars. We can re-write that demand curve as: P = 40,000 - 2.5 Q. Take every possibly quantity that the managers might choose between and 7,000 in units of 100. For each possible quantity, calculate the associated price the managers would need to charge, the revenue they would earn, and the total costs. You can then calculate profits for each level of quantity. Highlight the cell that contains the highest value of profit. Finally, you can also approximate marginal revenue here as the change in total revenue after the next 100 cars are produced. At what quantity does marginal revenue roughly equal marginal cost?…Suppose that managers at Honda are deciding how to price the new Honda Accord. The managers estimate that their total costs increase by $20,000 for each car they produce. They also estimate the demand curve they face; it is described by the equation: Q = -0.4 P + 16,000, where Q represents the quantity of Honda Accords they will sell and P represents the price they charge in US dollars. We can re-write that demand curve as: P = 40,000 - 2.5 Q. Take every possibly quantity that the managers might choose between 0 and 7,000 in units of 100. For each possible quantity, calculate the associated price the managers would need to charge, the revenue they would earn, and the total costs. You can then calculate profits for each level of quantity. Highlight the cell that contains the highest value of profit.
- Henry Potter owns the only well in town that produces clean drinking water. He faces the following demand, marginal revenue, and marginal cost curves:Demand: P = 70 – QMarginal revenue: MR = 70 – 2QMarginal cost: MC = 10 + Qa) Graph these three curves. Assuming that Mr. Potter maximizes profit, what quantity does he produce? What price does he charge? Show these results on your graph.b) Mayor George Bailey, concerned about water consumers, is considering a price ceiling that is 10 percent below the monopoly price derived in part (a). What quantity would be demanded at this new price? Would the profit-maximizing Mr. Potter produce that amount? Explain. (Hint: Think about marginal cost.)c) George’s Uncle Billy says that a price ceiling is a bad idea because price ceilings cause shortages. Is he right in thiscase? What size shortage would the price ceiling create? Explain.d) George’s friend Clarence, who is even more concerned about consumers, suggests a price ceiling 50 percent below…Refer to the figure below to answer questions number 21 and 22. Suppose the graphs represent the demand for use of a local golf course for which there is no significant competition (it has a local monopoly); P denotes the price of a round of golf; Q is the quantity of rounds "sold" each day. The left graph represents the demand during weekdays, and the right graph the weekend demand. $10 $9 $9 $7 MCHATC $4 MCHATC Dwe MR Dwo 350 Q \MRWE O 100120 100 200 200 Q 21. This profit-maximizing golf course should: A. charge $9 for each round, regardless of the day of the week. B. charge $7 for each round, regardless of the day of the week. C. charge $7 for each round on weekdays, and $10 during the weekend. D. charge $9 for each round on weekdays, and $10 during the weekend. 22. This profit-maximizing golf course will earn how much economic profit over the course of a full seven-day week? A. $4,200 B. $1,200 C. $3,400 D. $2,700A university football team faces the following demand schedule shown for tickets for each home game it plays. The team plays in a stadium that holds 60,000 fans. It estimates that its marginal cost of attendance, and thus for tickets sold, is zero. The table below reflects this data: Price per Ticket ($) Tickets per Game 100 80 60 40 20 0 Total revenue = $ 20,000 40,000 60,000 80,000 100,000 Using this information, calculate how much total revenue the team will earn.
- The blue curve on the following graph represents the demand curve facing a firm that can set its own prices. Use the graph input tool to help you answer the following questions. You will not be scored on any changes you make to this graph. Note: Once you enter a value in a white field, the graph and any corresponding amounts in each grey field will change accordingly. PRICE (Dollars per unit) 100 TOTAL REVENUE (Dollars) 90 80 20 10 0 1250 1125 1000 875 750 625 500 On the previous graph, change the number found in the Quantity Demanded field to determine the prices that correspond to the production of 0, 10, 20, 25, 30, 40, or 50 units of output. Calculate the total revenue for each of these production levels. Then, on the following graph, use the green points (triangle symbol) to plot the results. 375 250 125 + 0 0 0 Demand 5 10 15 20 25 30 35 40 45 50 QUANTITY (Units) + 5 20 10 15 25 30 35 QUANTITY (Number of units) 40 Graph Input Tool Market for Goods 45 50 Quantity Demanded (Units)…For the following exercise, which has already been published previously, please you only need to answer question d) 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.Imagine that you run the toll authority for a city bridge. You must charge all of your customers the exact same toll. Initially, you have set the price at $7 per trip. The blue line on the following graph shows the daily demand curve for trips across the city bridge. On the following graph, use the purple rectangle (diamond symbols) to shade the area representing the total daily revenue when the toll is $7 on the graph. Notice that when you click on the rectangle, the area is displayed. TOLL (Dollars per vehicle) 10 9 8 7 4 2 1 0 0 Demand 10 20 30 40 50 60 70 80 QUANTITY (Thousands of vehicles per day) 90 When the toll is $7, total revenue is $ 100 TR at $7 TR at $8 An advisor has suggested that if you raise the toll to $8, the toll authority would bring in more revenue. To analyze this, use the green rectangle (triangle symbols) to shade the area representing the total daily revenue when the toll is $8 on the graph. thousand per day, but when the toll is $8, total revenue is $ Based…