In a small town there is only one movie theater. If the theater is open, the ownershave to pay a fixed amount of $6,000 for the films, ushers, etc., regardless ofhow many people come to the movie. For simplicity, assume that if the theater isclosed, its costs are zero. The demand function for movies in the town ischaracterized by A = 45-T60a. Graph the market demand curve, the marginal revenue curve, andthe marginal cost curve. Label the axes, curves, and intercepts.b. Find the profit-maximizing price and quantity of movie tickets, andindicate them on the graph. How much would the theater make inprofits?c. Calculate deadweight loss caused by the monopoly and indicate thearea on the graph. |

Demand: P = 45 - (Q/60) TR = PQ = 45Q - (Q2/60) MR = dTR/dQ = 45 - (Q/30) MC = 0 From demand: When Q…

Graph the market demand curve, the marginal revenue curve, and the marginal cost curve. Label the axes, curves, and intercepts. Find the profit-maximizing price and quantity of movie tickets, and indicate them on the graph. How much would the theater make in profits?

Graph the market demand curve, the marginal revenue curve, and the marginal cost curve. Label the axes, curves, and intercepts. Find the profit-maximizing price and quantity of movie tickets, and indicate them on the graph. How much would the theater make in profits?

Essentials of Economics (MindTap Course List)

8th Edition

ISBN:9781337091992

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter14: Monopoly

Section: Chapter Questions

Problem 10PA

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Question

100%

In a small town there is only one movie theater. If the theater is open, the owners
have to pay a fixed amount of $6,000 for the films, ushers, etc., regardless of
how many people come to the movie. For simplicity, assume that if the theater is
closed, its costs are zero. The demand function for movies in the town is
characterized by A = 45-T
60
a. Graph the market demand curve, the marginal revenue curve, and
the marginal cost curve. Label the axes, curves, and intercepts.
b. Find the profit-maximizing price and quantity of movie tickets, and
indicate them on the graph. How much would the theater make in
profits?
c. Calculate deadweight loss caused by the monopoly and indicate the
area on the graph. |

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