EBK ESSENTIALS OF ECONOMICS
7th Edition
ISBN: 8220102452107
Author: Mankiw
Publisher: CENGAGE L
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Chapter 14, Problem 5PA
To determine
The diagrammatic representation of demand and cost
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A movie theater is showing two different movies: a Hollywood blockbuster (with 100 customers willing to pay $10 for a ticket, and 100 willing to pay $8) and an independent film that attracts 50 film buffs, willing to pay $20 each. Marginal cost is zero and neither movie can fill theater capacity. What is the theater's maxim profit if it cannot price discriminate (it must charge the same price for both movies) and if it can price discriminate (it may charge different prices for different movies)?
The table shows the town of Driveaway's demand schedule for gasoline. Assume the town's gasoline seller(s) incurs a cost of $2 for each gallon sold, with no fixed cost.
Quantity
Price
Total Revenue
(Gallons)
(Dollars per gallon)
(Dollars)
8
50
7
350
100
600
150
750
200
4
800
250
3
750
If there are exactly five sellers of gasoline in Driveaway and if they collude, then which of the following outcomes would be most profitable for the sellers?
Each seller will sell 30 gallons and charge a price of $5.
Each seller will sell 50 gallons and charge a price of $3.
Each seller will sell 30 gallons and charge a price of $4.
Each seller will sell 40 gallons and charge a price of $4.
O O
If you have a graph showing a monopolistic competitive situation in which demand shifts to the left in the long run but your graph only shows the MR curve in the short run, how do you figure out where the long-run MR line should go on the graph? (I have 2 demand curves (sr and lr), but only 1 MR curve (sr). I think it would be to the left of MR sr, but don't know how to draw it. One would need to know this to figure out excess capacity and markup, right?
Chapter 14 Solutions
EBK ESSENTIALS OF ECONOMICS
Ch. 14.1 - Prob. 1QQCh. 14.2 - Prob. 2QQCh. 14.3 - Prob. 3QQCh. 14.4 - Prob. 4QQCh. 14.5 - Prob. 5QQCh. 14 - Prob. 1QRCh. 14 - Prob. 2QRCh. 14 - Prob. 3QRCh. 14 - Prob. 4QRCh. 14 - Prob. 5QR
Ch. 14 - Prob. 6QRCh. 14 - Prob. 7QRCh. 14 - Prob. 8QRCh. 14 - Prob. 1QCMCCh. 14 - Prob. 2QCMCCh. 14 - Prob. 3QCMCCh. 14 - Prob. 4QCMCCh. 14 - Prob. 5QCMCCh. 14 - Prob. 6QCMCCh. 14 - Prob. 1PACh. 14 - Prob. 2PACh. 14 - Prob. 3PACh. 14 - Prob. 4PACh. 14 - Prob. 5PACh. 14 - Prob. 6PACh. 14 - Prob. 7PACh. 14 - Prob. 8PACh. 14 - Prob. 9PACh. 14 - Prob. 10PACh. 14 - Prob. 11PA
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- Suppose that you are a manager for a firm like EBC Brakes, which manufactures brakes for automobiles and motorcycles. Your company has two plants, one in the United States and the other in the United Kingdom. The following tables include estimated demand and marginal revenue for your brakes, along with the marginal costs at the two factories. what quantity and price maximize your firms profit? What is the profit – maximizing number of brakes produced in the U.S. plant? In the U.K. plant? Quantity Demanded (brakes per hour) Price (dollars per brake) Quantity Produced in the U.K. plant (brakes per hour) Quantity Produced in the U.S. (brakes per hour) Total Quantity Produced Marginal Cost (dollars per brake) Marginal Revenue (dollars per brake) 104 196 47 42 89 66 92 105 195 48 44 92 68 90 106 194 49 46 95 70 88 107 193 50 48 98 72 86 108 192 51 50 101 74 84 109 191 52 52 104…arrow_forwardYou are the manager of the local movie theatre in a small town. Running a movie has a fixed cost of $2,000, but selling an extra ticket (i.e. accommodating an extra viewer) has zero marginal cost. Below are the demand schedules for your two types of customers: Price $ Adults Teens and Seniors 10 50 9 100 8 200 7 200 50 6 300 100 5 350 150 4 400 200 3 400 300 400 300 1 400 300 If you are to charge a single price (i.e., if price discrimination is prohibited), what price would you set for a ticket to maximize profit? How much profit do you make? Price = $ Profit = $ If you were allowed to price-discriminate, what price would you charge for an adult ticket? For senior/teen ticket? How much profit do you make? Price for adults = $ Price for seniors/teens= $ Profit = $arrow_forwardSuppose that in the short run the firms in a monopolistically competitive industry are making an economic profit. what is likely to happen in this market over the long run? Will the firms be able to sustain this economic profit over the long run? Describe the adjustment process in this market towards the long run equilibrium in detail.arrow_forward
- Three firms are producing a good and are competing in prices: consumers buy from the firm that has the lowest price, and each firm on its own can satisfy the entire market. If more than one firm choose the same price the demand is divided equally among them. There are no other firms in the market. Two firms have the same constant marginal cost cL and the third one has a higher marginal cost cH : cL < cH . Explain what will be the equilibrium price in this market.arrow_forwardno handwritten solution pleasearrow_forwardGary's Gas and Frank's Fuel are the only two providers of gasoline in their town. Below is the demand schedule for the market of gasoline. Assume that the cost of producing gasoline is zero per gallon (AC-D0, FC-0). Suppose that the two producers collude (split production and profits evenly), what are the profits of each firm? Q demanded (in gallons) 4 6 7 8. 10 Market price (in dollar) $22 $20 $18 $16 $14 $12 $10 $8 $6 $0 $70 $72 O $36 O $76 $64 3. 2. 1,arrow_forward
- Gary's Gas and Frank's Fuel are the only two providers of gasoline in their town. Below is the demand schedule for the market of gasoline. Assume that the cost of producing gasoline is 3 per gallon (AC=3, FC-D0). Suppose that the two producers collude (split production and profits evenly), what are the joint profits of these two firms? Q demanded (in gallons) 10 12 4 Market price (in dollar) $22 $20 $18 $16 $14 $12 $10 $8 $6 $0 O $27 O None of these options is correct. $55 O $72 O $36 50 00 3)arrow_forwardSort the following characteristics by whether they describe competitive markets, firms that can perfectly price-discriminate, both, or neither. Items (4 items) (Drag and drop into the appropriate area below) result in some deadweight loss Categories zero economic profit in the long run Competitive market Drag and drop here maximize total surplus Perfect price discrim. Drag and drop here eliminate consumer surplus Both Drag and drop here Neither Drag and drop herearrow_forwardplease as soon as possible . thank youarrow_forward
- 2) Assume that there are 2 firms producing an identical product. Both firms have the same total cost function TC(q) =q2. The inverse demand function for the firms' output is p=120 Q, where Q is the total output and p is price. 1. What are the equilibrium price, output and profits of each firm if they are competing with each other? (Hint: Consider the equilibrium in a Cournot game.) 2. What happens if they form a cartel? Calculate the equilibrium price, output, and profits for the cartel? 3. If a single firm cheated, what would its output and profits be, assuming the other firm maintains the cartel price? Calculate the new outputs and profits for bath firms: 4. Discuss why it is hard to enforce a cartel. Explain using words. DO NOT do any calculations. DO NOT draw any graphs. 5. What can the cartel members do to enforce the cartel agreement? Propose a method. Describe the method using words. DO NOT do any calculations. DO NOT draw any graphs.arrow_forward21. In the industry, only two firms (Firm 1 and Firm 2) operate and they produce a homogenous good. They collude: they maximize their joint profit and split it equally between them. Firm I has the total cost of producing q; units of output given by the function TC(q)-8q1. The total cost of producing q: units of output for Firm 2 is TC(q)-q. Only integer quantities are allowed (no fractions). The market demand for the good is Q(P)-72-P, where Q is the quantity demanded and P is the unit price of the good. How many units of the good do cach firm produce in the equilibrium? A. Each firm produces 14 units. B. Firm I produces 32 units, and Firm 2 produces 2 units. C. Firm 1 produces 28 units, and Firm 2 produces 4 units. D. Each firm produces 16 units. E. None of the abovearrow_forwardSuppose a country's mobile phone industry is supplied by only two firms (i.e. an oligopoly). Explain how the presence of two firms affects the price elasticity of demand of each firm's output.arrow_forward
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