Total cost Price (dollars per ticket) Quantity (tickets (dollars per show) per show) 20 0 1,000 Big Top is the only circus in the nation. The table sets out the demand schedule for circus tickets and the cost schedule for producing the circus. Calculate Big Top's profit-maximizing price, output, and economic profit if it charges a single price for all tickets. a. 18 100 1,600 16 200 2,200 14 300 2,800 12 400 3,400 10 500 4,000 8 600 4,600 6 700 5,200 Big Top's total revenue and marginal revenue schedules are in the second table (see above table), which is useful to answer these questions. Big Top's marginal cost is constant and equal to $6 per ticket. Big Top's marginal revenue equals its marginal cost when the quantity of tickets is 350 tickets per show and the price is $13 per ticket. The total revenue is 350 tickets $13, which is $4,550. The total cost of 350 tickets is $3,100. So the economic profit equals $4,550 - $3,100, which is $1,450. You are constructing a table with total costs, average total costs, and total 4 800 5,800 revenue. b. When Big Top maximizes profit, what is the consumer surplus and producer surplus and is the circus efficient? Explain why or why not. You are constructing a table showing total revenue and marginal revenue. You are also constructing a graph to show consumer surplus and producer surplus C. At the market equilibrium, no children under 10 years old attend the circus. Big Top offers children under 10 a discount of 50 percent. How will this discount change the consumer surplus and producer surplus? Will Big Top be more efficient by offering the discount to children? No graph is needed just an explanation.
Total cost Price (dollars per ticket) Quantity (tickets (dollars per show) per show) 20 0 1,000 Big Top is the only circus in the nation. The table sets out the demand schedule for circus tickets and the cost schedule for producing the circus. Calculate Big Top's profit-maximizing price, output, and economic profit if it charges a single price for all tickets. a. 18 100 1,600 16 200 2,200 14 300 2,800 12 400 3,400 10 500 4,000 8 600 4,600 6 700 5,200 Big Top's total revenue and marginal revenue schedules are in the second table (see above table), which is useful to answer these questions. Big Top's marginal cost is constant and equal to $6 per ticket. Big Top's marginal revenue equals its marginal cost when the quantity of tickets is 350 tickets per show and the price is $13 per ticket. The total revenue is 350 tickets $13, which is $4,550. The total cost of 350 tickets is $3,100. So the economic profit equals $4,550 - $3,100, which is $1,450. You are constructing a table with total costs, average total costs, and total 4 800 5,800 revenue. b. When Big Top maximizes profit, what is the consumer surplus and producer surplus and is the circus efficient? Explain why or why not. You are constructing a table showing total revenue and marginal revenue. You are also constructing a graph to show consumer surplus and producer surplus C. At the market equilibrium, no children under 10 years old attend the circus. Big Top offers children under 10 a discount of 50 percent. How will this discount change the consumer surplus and producer surplus? Will Big Top be more efficient by offering the discount to children? No graph is needed just an explanation.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Question
| Marginal Cost is equal to Marginal Revenue when |
Transcribed Image Text:Price
(dollars
ticket)
20
Quantity
Total cost
(dollars per
Big Top is the only circus in the nation. The table
sets out the demand schedule for circus tickets
and the cost schedule for producing the circus.
(tickets
per show)
show)
0
1,000
a.
18
100
1,600
Calculate Big Top's profit-maximizing price,
output, and economic profit if it charges a
single price for all tickets.
16
200
2,200
14
300
2,800
12
400
3,400
10
500
4,000
8
600
4,600
6
700
5,200
Big Top's total revenue and marginal revenue
schedules are in the second table (see above
table), which is useful to answer these
questions. Big Top's marginal cost is constant
and equal to $6 per ticket. Big Top's marginal
revenue equals its marginal cost when the
quantity of tickets is 350 tickets per show and the price is $13 per ticket. The total revenue is 350 tickets x
$13, which is $4,550. The total cost of 350 tickets is $3,100. So the economic profit equals $4,550 -
$3,100, which is $1, 450. You are constructing a table with total costs, average total costs, and total
4
800
5,800
0
revenue.
b. When Big Top maximizes profit, what is the consumer surplus and producer
surplus and is the circus efficient? Explain why or why not. You are constructing
a table showing total revenue and marginal revenue. You are also constructing
a graph to show consumer surplus and producer surplus
C.
At the market equilibrium, no children under 10 years old attend the circus. Big
Top offers children under 10 a discount of 50 percent. How will this discount
change the consumer surplus and producer surplus? Will Big Top be more
efficient by offering the discount to children? No graph is needed just an
explanation.
d. If Big Top is regulated to produce the efficient output, what is the quantity of
tickets sold, what is the price of a ticket, and what would be the consumer
surplus? No graph is needed, just an explanation with a calculation of consumer
surplus
e.
If Big Top is regulated to charge a price equal to average total cost, what is the quantity of
tickets sold, the price of a ticket, and economic profit? You need a graph showing price, MC
and AC. You need a graph and you have to show deadweight loss
per
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Transcribed Image Text:Price
(dollars
ticket)
20
Quantity
Total cost
(dollars per
Big Top is the only circus in the nation. The table
sets out the demand schedule for circus tickets
and the cost schedule for producing the circus.
(tickets
per show)
show)
0
1,000
a.
18
100
1,600
Calculate Big Top's profit-maximizing price,
output, and economic profit if it charges a
single price for all tickets.
16
200
2,200
14
300
2,800
12
400
3,400
10
500
4,000
8
600
4,600
6
700
5,200
Big Top's total revenue and marginal revenue
schedules are in the second table (see above
table), which is useful to answer these
questions. Big Top's marginal cost is constant
and equal to $6 per ticket. Big Top's marginal
revenue equals its marginal cost when the
quantity of tickets is 350 tickets per show and the price is $13 per ticket. The total revenue is 350 tickets x
$13, which is $4,550. The total cost of 350 tickets is $3,100. So the economic profit equals $4,550 -
$3,100, which is $1, 450. You are constructing a table with total costs, average total costs, and total
4
800
5,800
0
revenue.
b. When Big Top maximizes profit, what is the consumer surplus and producer
surplus and is the circus efficient? Explain why or why not. You are constructing
a table showing total revenue and marginal revenue. You are also constructing
a graph to show consumer surplus and producer surplus
C.
At the market equilibrium, no children under 10 years old attend the circus. Big
Top offers children under 10 a discount of 50 percent. How will this discount
change the consumer surplus and producer surplus? Will Big Top be more
efficient by offering the discount to children? No graph is needed just an
explanation.
d. If Big Top is regulated to produce the efficient output, what is the quantity of
tickets sold, what is the price of a ticket, and what would be the consumer
surplus? No graph is needed, just an explanation with a calculation of consumer
surplus
e.
If Big Top is regulated to charge a price equal to average total cost, what is the quantity of
tickets sold, the price of a ticket, and economic profit? You need a graph showing price, MC
and AC. You need a graph and you have to show deadweight loss
per
Solution
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