Suppose Ginny 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 Ginny is her time. As she gives more haircuts, Ginny 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. Ginny's clients are a varied group willing to pay between $16.00 and $28.00 for a haircut. Assume that Ginny cannot price discriminate, i.e., charge different clients different prices. If Ginny charges $28.00 per haircut, she will have one client per week; if she charges $24.00, she will have two; if she charges $20.00, three, and so forth. The following table contains data on the revenues and costs of Ginny's haircut business as a function of her price-quantity choice. (The costs are based on the value of Ginny's alternative activities, in dollar terms. For example, the total cost of the first haircut is $4-the value Ginny 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 (Haircuts per week) Marginal Revenue (Dollars per haircut) Price Total Revenue Total Cost Marginal Cost (Dollars per haircut) Profit (Dollars per haircut) (Dollars per week) (Dollars per week) (Dollars per week) 28.00 4.00 1. 28.00 28.00 4.00 24.00 20.00 8.00 2. 24.00 48.00 12.00 36.00 12.00 8.00 3 20.00 60.00 20.00 40.00 4 18.00 36.00 8.00 20.00 16.00 ৪0.00 56.00 24.00 AAAAA
Suppose Ginny 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 Ginny is her time. As she gives more haircuts, Ginny 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. Ginny's clients are a varied group willing to pay between $16.00 and $28.00 for a haircut. Assume that Ginny cannot price discriminate, i.e., charge different clients different prices. If Ginny charges $28.00 per haircut, she will have one client per week; if she charges $24.00, she will have two; if she charges $20.00, three, and so forth. The following table contains data on the revenues and costs of Ginny's haircut business as a function of her price-quantity choice. (The costs are based on the value of Ginny's alternative activities, in dollar terms. For example, the total cost of the first haircut is $4-the value Ginny 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 (Haircuts per week) Marginal Revenue (Dollars per haircut) Price Total Revenue Total Cost Marginal Cost (Dollars per haircut) Profit (Dollars per haircut) (Dollars per week) (Dollars per week) (Dollars per week) 28.00 4.00 1. 28.00 28.00 4.00 24.00 20.00 8.00 2. 24.00 48.00 12.00 36.00 12.00 8.00 3 20.00 60.00 20.00 40.00 4 18.00 36.00 8.00 20.00 16.00 ৪0.00 56.00 24.00 AAAAA
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
Related questions
Question
Transcribed Image Text:30
25
Marginal Revenue
Marginal Cost
5
QUANTITY OF OUTPUT (Haircuts per week)
Ginny maximizes her profit by serving
v per week and charging
v per haircut.
If Ginny gave more haircuts than her optimal quantity of haircuts, which of the following statements would be true? Check all that apply.
O Ginny's marginal revenue would be less than her marginal cost.
O Ginny's profit (total revenue minus total cost) would decline.
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PRICE AND COST (Dollars per haircut)
Transcribed Image Text:Homework (Ch 09)
* MindTap - Cengage Learning
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CENGAGE MINDTAP
Homework (Ch 09)
Suppose Ginny 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 Ginny is her time. As she gives more haircuts,
Ginny 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.
Ginny's clients are a varied group willing to pay between $16.00 and $28.00 for a haircut. Assume that Ginny cannot price discriminate, i.e., charge
different clients different prices. If Ginny charges $28.00 per haircut, she will have one client per week; if she charges $24.00, she will have two; if
she charges $20.00, three, and so forth. The following table contains data on the revenues and costs of Ginny's haircut business as a function of her
price-quantity choice. (The costs are based on the value of Ginny's alternative activities, in dollar terms. For example, the total cost of the first haircut
is $4-the value Ginny 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.
Marginal
Revenue
Output
(Haircuts per
week)
Total Revenue
(Dollars per
week)
Price
Total Cost
(Dollars per
week)
Marginal Cost
(Dollars per
haircut)
Profit
(Dollars per
haircut)
(Dollars per
haircut)
(Dollars per
week)
28.00
4.00
1
28.00
28.00
4.00
24.00
20.00
8.00
2
24.00
48.00
12.00
36.00
3.
12.00
8.00
20.00
60.00
20.00
40.00
4
18.00
36.00
8.00
5.
16.00
80.00
56.00
20.00
24.00
On the following graph, use the blue points (circle symbol) to plot Ginny'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.
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