Suppose Amy gives haircuts on Saturdays to make extra money. She is the only person in town cutting hair on Saturdays and therefore has some market power. Assume that she does not incur fixed costs, and the only significant variable cost to Amy is her time. As she gives more haircuts, Amy must increasingly forgo other valuable Saturday activities. For example, if she gives one haircut, she forgoes reading the paper after breakfast. If she gives two haircuts, she gives up reading the paper and sleeping an extra half-hour. Amy's clients are a varied group willing to pay between $20.00 and $36.00 for a haircut. Assume that Amy cannot price discriminate, i.e., charge different clients different prices. If Amy charges $36.00 per haircut, she will have one client per week; if she charges $32.00, she will have two; if she charges $28.00, three, and so forth. The following table contains data on the revenues and costs of Amy's haircut business as a function of her price–quantity choice. (The costs are based on the value of Amy's alternative activities, in dollar terms. For example, the total cost of the first haircut is $4—the value Amy places on reading the newspaper after breakfast.) Fill in the missing cells of the table and then use them to answer the questions that follow. Output Price Total Revenue Marginal Revenue Total Cost Marginal Cost Profit (Haircuts per week) (Dollars per haircut) (Dollars per week) (Dollars per haircut) (Dollars per week) (Dollars per haircut) (Dollars per week) 0 0 0 0 36.00 4.00 1 36.00 36.00 4.00 32.00 28.00 4.00 2 32.00 64.00 8.00 56.00 20.00 8.00 3 28.00 84.00 16.00 68.00 4 24.00 24.00 4.00 8.00 5 20.00 100.00 32.00 68.00 On the following graph, use the blue points (circle symbol) to plot Amy's total revenue curve, use the orange points (square symbol) to plot her total cost curve, and use the purple points (diamond symbol) to plot her profit curve. Be sure to graph from left to right, starting with zero haircuts and ending with five. Line segments will automatically connect the points. On the following graph, use the blue points (circle symbol) to plot her marginal revenue (MR) curve, and then use the orange points (square symbol) to plot Amy's marginal cost (MC) curve for the first five haircuts. Be sure to plot from left to right and to plot between integers. For example, if Amy's marginal cost of increasing her production from one haircut to two haircuts is x, then you would plot a point at (1.5, x). Line segments will automatically connect the points. Amy maximizes her profit by serving ______per week and charging _______per haircut. If Amy gave more haircuts than her optimal quantity of haircuts, which of the following statements would be true? Check all that apply. - Amy's marginal revenue would be less than her marginal cost. - Amy's profit (total revenue minus total cost) would decline.

Suppose Amy gives haircuts on Saturdays to make extra money. She is the only person in town cutting hair on Saturdays and therefore has some market power. Assume that she does not incur fixed costs, and the only significant variable cost to Amy is her time. As she gives more haircuts, Amy must increasingly forgo other valuable Saturday activities. For example, if she gives one haircut, she forgoes reading the paper after breakfast. If she gives two haircuts, she gives up reading the paper and sleeping an extra half-hour. Amy's clients are a varied group willing to pay between $20.00 and $36.00 for a haircut. Assume that Amy cannot price discriminate, i.e., charge different clients different prices. If Amy charges $36.00 per haircut, she will have one client per week; if she charges $32.00, she will have two; if she charges $28.00, three, and so forth. The following table contains data on the revenues and costs of Amy's haircut business as a function of her price–quantity choice. (The costs are based on the value of Amy's alternative activities, in dollar terms. For example, the total cost of the first haircut is $4—the value Amy places on reading the newspaper after breakfast.) Fill in the missing cells of the table and then use them to answer the questions that follow. Output Price Total Revenue Marginal Revenue Total Cost Marginal Cost Profit (Haircuts per week) (Dollars per haircut) (Dollars per week) (Dollars per haircut) (Dollars per week) (Dollars per haircut) (Dollars per week) 0 0 0 0 36.00 4.00 1 36.00 36.00 4.00 32.00 28.00 4.00 2 32.00 64.00 8.00 56.00 20.00 8.00 3 28.00 84.00 16.00 68.00 4 24.00 24.00 4.00 8.00 5 20.00 100.00 32.00 68.00 On the following graph, use the blue points (circle symbol) to plot Amy's total revenue curve, use the orange points (square symbol) to plot her total cost curve, and use the purple points (diamond symbol) to plot her profit curve. Be sure to graph from left to right, starting with zero haircuts and ending with five. Line segments will automatically connect the points. On the following graph, use the blue points (circle symbol) to plot her marginal revenue (MR) curve, and then use the orange points (square symbol) to plot Amy's marginal cost (MC) curve for the first five haircuts. Be sure to plot from left to right and to plot between integers. For example, if Amy's marginal cost of increasing her production from one haircut to two haircuts is x, then you would plot a point at (1.5, x). Line segments will automatically connect the points. Amy maximizes her profit by serving per week and charging _per haircut. If Amy gave more haircuts than her optimal quantity of haircuts, which of the following statements would be true? Check all that apply. - Amy's marginal revenue would be less than her marginal cost. - Amy's profit (total revenue minus total cost) would decline.

ENGR.ECONOMIC ANALYSIS

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ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Amy's clients are a varied group willing to pay between $20.00 and $36.00 for a haircut. Assume that Amy cannot price discriminate, i.e., charge different clients different prices. If Amy charges $36.00 per haircut, she will have one client per week; if she charges $32.00, she will have two; if she charges $28.00, three, and so forth. The following table contains data on the revenues and costs of Amy's haircut business as a function of her price–quantity choice. (The costs are based on the value of Amy's alternative activities, in dollar terms. For example, the total cost of the first haircut is $4—the value Amy places on reading the newspaper after breakfast.)

Fill in the missing cells of the table and then use them to answer the questions that follow.

Output	Price	Total Revenue	Marginal Revenue	Total Cost	Marginal Cost	Profit
(Haircuts per week)	(Dollars per haircut)	(Dollars per week)	(Dollars per haircut)	(Dollars per week)	(Dollars per haircut)	(Dollars per week)
0		0		0		0
36.00	4.00
1	36.00	36.00	4.00	32.00
28.00	4.00
2	32.00	64.00	8.00	56.00
20.00	8.00
3	28.00	84.00	16.00	68.00

4	24.00		24.00
4.00	8.00
5	20.00	100.00	32.00	68.00

On the following graph, use the blue points (circle symbol) to plot Amy's total revenue curve, use the orange points (square symbol) to plot her total cost curve, and use the purple points (diamond symbol) to plot her profit curve. Be sure to graph from left to right, starting with zero haircuts and ending with five. Line segments will automatically connect the points.

On the following graph, use the blue points (circle symbol) to plot her marginal revenue (MR) curve, and then use the orange points (square symbol) to plot Amy's marginal cost (MC) curve for the first five haircuts. Be sure to plot from left to right and to plot between integers. For example, if Amy's marginal cost of increasing her production from one haircut to two haircuts is x, then you would plot a point at (1.5, x). Line segments will automatically connect the points.

Amy maximizes her profit by serving ______per week and charging _______per haircut.

If Amy gave more haircuts than her optimal quantity of haircuts, which of the following statements would be true?

Check all that apply.

- Amy's marginal revenue would be less than her marginal cost.

- Amy's profit (total revenue minus total cost) would decline.

On the following graph, use the blue points (circle symbol) to plot Amy's total revenue curve, use the orange points (square symbol) to plot her total
cost curve, and use the purple points (diamond symbol) to plot her profit curve. Be sure to graph from left to right, starting with zero haircuts and
ending with five. Line segments will automatically connect the points.
B
TOTAL REVENUE, TOTAL COST, AND PROFIT (Dollars per week)
Croyd) 1900 ONYO
2 N
QUANTITY OF OUTPUT (Haircuts par wek)
8
QUANTITY OF OUTPUT (Hr)
o
Amy maximizes her profit by serving
TobalHa
On the following graph, use the blue points (circle symbol) to plot her marginal revenue (MR) curve, and then use the orange points (square symbol)
to plot Amy's marginal cost (MC) curve for the first five haircuts. Be sure to plot from left to right and to plot between integers. For example, Amy's
marginal cost of increasing her production from one haircut to two haircuts is x, then you would plot a point at (1.5, x). Line segments will
automatically connect the points.
--0--
Tube C
Profit
Marginal Harve
-O-
Marginal Col
(?)
per week and charging
(2)
per haircut.
If Amy gave more haircuts than her optimal quantity of haircuts, which of the following statements would be true? Check all that apply.
Amy's marginal revenue would be less than her marginal cost.
Amy's profit (total revenue minus total cost) would decline.

2. Marginal analysis and profit maximization
Suppose Amy gives haircuts on Saturdays to make extra money. She is the only person in town cutting hair on Saturdays and therefore has some
market power. Assume that she does not incur fixed costs, and the only significant variable cost to Amy is her time. As she gives more haircuts, Amy
must increasingly forgo other valuable Saturday activities. For example, if she gives one haircut, she forgoes reading the paper after breakfast. If she
gives two haircuts, she gives up reading the paper and sleeping an extra half-hour.
Amy's clients are a varied group willing to pay between $20.00 and $36.00 for a haircut. Assume that Amy cannot price discriminate, i.e., charge
different clients different prices. If Amy charges $36.00 per haircut, she will have one client per week; if she charges $32.00, she will have two; if she
charges $28.00, three, and so forth. The following table contains data on the revenues and costs of Amy's haircut business as a function of her price-
quantity choice. (The costs are based on the value of Amy's alternative activities, in dollar terms. For example, the total cost of the first haircut is $4-
the value Amy places on reading the newspaper after breakfast.)
Fill in the missing cells of the table and then use them to answer the questions that follow.
Output
Price
(Haircuts per
week)
(Dollars per
haircut)
Marginal Revenue
(Dollars per
haircut)
0
1
2
3
5
36.00
32.00
28.00
24.00
20.00
Total Revenue
(Dollars per
week)
0
36.00
64.00
84.00
100.00
36.00
28.00
20.00
4.00
Total Cost
(Dollars per
week)
0
4.00
8.00
16.00
24.00
32.00
Marginal Cost
(Dollars per
haircut)
4.00
4.00
8.00
8.00
Profit
(Dollars per
week)
0
32.00
56.00
68.00
68.00

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Profit maximization is a short-run or long-run process of a firm to determine output, input, and price levels. The profit is maximum when the gap between total revenue and cost is at its maximum.

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