5. In a small college town there is only one movie theater. In a given month, 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 movies. For simplicity, assume that if the theater is closed, its costs are zero. The demand function for movie tickets in the town is characterized by??= 45 −QT/60a. Draw the market demand curve, the marginal revenue curve, and the marginal cost curve. Make sure to label the axes, curves, and intercepts.b. Find the profit-maximizing price and quantity of movie tickets, and indicate them on the graph above. How much would the theater make in profits?c. Suppose the local government implements a property tax, so that each month the theater now must pay a lump sum tax of $700. What will be the price and quantity of movie tickets under this tax? 5. In a small college town there is only one movie theater. In a given month, if thetheater 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 movies. For simplicity,assume that if the theater is closed, its costs are zero. The demand function for movietickets in the town is characterized by Pr = 4560a On the axes below, draw the market demand curve, the marginal revenuecurve, and the marginal cost curve. Make sure to label the axes, curves, andintercepts.b. Find the profit-maximizing price and quantity of movie tickets, andindicate them on the graph above. How much would the theater make inprofits?c. Suppose the local government implements a property tax, so that eachmonth the theater now must pay a lump sum tax of $700. What will bethe price and quantity of movie tickets under this tax?

A monopoly market is a type of market structure in which a single seller or producer controls the entire supply of a particular good or service, thereby dominating the market and having significant influence over the price and quantity of that good or service. In a monopoly market, there are no close substitutes for the product or service being offered, and entry by other firms is typically restricted or impossible due to barriers to entry such as high start-up costs, exclusive access to resources, patents, or legal restrictions.Answer A)Answer B)This is the only theater available in a small town; therefore it has no competition so far. We assume it will operate as monopoly while deciding price per ticket to charge.Pt = 45-(Qt/60)Profis for the monopoly is maximised when Marginal revenue equals Marginal costA owner of theater pays $6000 lump-sum as a cost, there is no other cost related payment is mentioned; therefore total cost remains the same irrespective of quantity of tickets sold.Hence Marginal Cost =0 Revenue = Price * Quantity =Pt*Qt = (45-(Qt/60))*Qt =45Qt -Qt2/60Marginal Revenue = dR/dQ = 45-(2Qt/60) = 45-(Qt/30)Profit is maximised at the level of production where MR=MCTherefore, 45-Qt/30 = 0Profit maximising Quantity = Qt =1350 units.Profit maximising Price = 45-Qt/60 =45-(1350/60) = 45-22.5 = $ 22.5Maximum Profit = (Revenue-Cost) = 1350*22.5-6000 =$ 24,375Answer C)Under lump-sum taxes worth $700, there is no change in Profit maximising Price and Quantity because tax is lump-sum and doesn't depend upon the Qt.Monopoly firm continue to produce profit maximising output wherever Marginal revenue equals to Marginal cost.Hence, the price and quantity of movie tickets under this tax are $ 22.5 and 1350 units and the profits will be reduced by $700.

Answered: 5. In a small college town there is…

ENGR.ECONOMIC ANALYSIS

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ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

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5. In a small college town there is only one movie theater. In a given month, 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 movies. For simplicity, assume that if the theater is closed, its costs are zero. The demand function for movie tickets in the town is characterized by

??= 45 −QT/60

a. Draw the market demand curve, the marginal revenue curve, and the marginal cost curve. Make sure to label the axes, curves, and intercepts.

b. Find the profit-maximizing price and quantity of movie tickets, and indicate them on the graph above. How much would the theater make in profits?
c. Suppose the local government implements a property tax, so that each month the theater now must pay a lump sum tax of $700. What will be the price and quantity of movie tickets under this tax?

5. In a small college town there is only one movie theater. In a given month, 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 movies. For simplicity,
assume that if the theater is closed, its costs are zero. The demand function for movie
tickets in the town is characterized by Pr = 45
60
a On the axes below, draw the market demand curve, the marginal revenue
curve, and the marginal cost curve. Make sure to label the axes, curves, and
intercepts.
b. Find the profit-maximizing price and quantity of movie tickets, and
indicate them on the graph above. How much would the theater make in
profits?
c. Suppose the local government implements a property tax, so that each
month the theater now must pay a lump sum tax of $700. What will be
the price and quantity of movie tickets under this tax?

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