Macroeconomics
13th Edition
ISBN: 9780134735696
Author: PARKIN, Michael
Publisher: Pearson,
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Chapter 13, Problem 11APA
To determine
Natural monopolies and the legal monopolies with the power to price discriminate.
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Question 5: Jimmy has a room that overlooks, from some distance, a major league baseball stadium. He decides to
rent a telescope for $50 a week and charge his friends and classmates to use it to peep at the game for 30 seconds. He
can act as a monopolist for renting out "peeps". For each person who takes a 30 second peep, it costs Jimmy $.20 to
clean the eyepiece. Jimmy believes he has the following demand for his service:
Price of
a Peep
$1.20
Quantity
of peeps demanded
1.00
90
100
150
200
250
300
70
60
50
350
40
30
400
450
20
10
500
550
a) For each price, calculate the total revenue from selling peeps and themarginal revenue per
peep.
Price
Quantity
TR
MR
$1.20
100
90
100
150
200
70
250
60
300
350
50
40
30
400
450
20
500
10
550
b) At what quantity will Jimmy's profit be maximized? What price will he charge? What will his total profit be?
c) Jimmy's landlady complains about all the visitors coming into the building and tells Jimmy to stop selling
peeps. Jimmy discovers, though, if he…
At a price of $8 per unit, Gadgets Incorporated is willing to supply 19,000 gadgets, while United Gadgets is willing to supply 16,000 gadgets. If the price were to rise to $10 per unit, their respective quantities supplied would rise to 28,000 and 22,000. If these are the only two firms supplying gadgets, what is the elasticity of supply in the market for gadgets?
Multiple Choice
1.59
1.4
2.22
0.63
MelCo’s Xamoff The global pharmaceuticals giant, MelCo, has had great success with Xamoff, and over-thecounter medicine that reduces exam-related anxiety. A patent currently protects Xamoff from competition, although rumors persist that similar products are in development. Two years ago, MelCo sold 25 million units for a price of $10 for a package of ten. Last year it raised the price to $11, and sales fell to 22 million units. Finally, a financial analyst estimates the cost of production at $2 per package. (a) Estimate the elasticity of demand for this product at $10. Is this price too high or too low? (b) Estimate the elasticity of demand for this product at $11. Is this price too high or too low? (c) Based on your answers to (a) and (b), what can we say about MelCo’s profit-maximizing price?
Chapter 13 Solutions
Macroeconomics
Ch. 13.1 - Prob. 1RQCh. 13.1 - Prob. 2RQCh. 13.1 - Prob. 3RQCh. 13.2 - Prob. 1RQCh. 13.2 - Prob. 2RQCh. 13.2 - Prob. 3RQCh. 13.2 - Prob. 4RQCh. 13.3 - Prob. 1RQCh. 13.3 - Prob. 2RQCh. 13.3 - Prob. 3RQ
Ch. 13.3 - Prob. 4RQCh. 13.4 - Prob. 1RQCh. 13.4 - Prob. 2RQCh. 13.4 - Prob. 3RQCh. 13.4 - Prob. 4RQCh. 13.5 - Prob. 1RQCh. 13.5 - Prob. 2RQCh. 13.5 - Prob. 3RQCh. 13.5 - Prob. 4RQCh. 13 - Prob. 1SPACh. 13 - Prob. 2SPACh. 13 - Prob. 3SPACh. 13 - Prob. 4SPACh. 13 - Prob. 5SPACh. 13 - Prob. 6SPACh. 13 - Prob. 7SPACh. 13 - Prob. 8SPACh. 13 - Prob. 9SPACh. 13 - Prob. 10APACh. 13 - Prob. 11APACh. 13 - Prob. 12APACh. 13 - Prob. 13APACh. 13 - Prob. 14APACh. 13 - Prob. 15APACh. 13 - Prob. 16APACh. 13 - Prob. 17APACh. 13 - Prob. 18APACh. 13 - Prob. 19APACh. 13 - Prob. 20APACh. 13 - Prob. 21APACh. 13 - Prob. 22APACh. 13 - Prob. 23APACh. 13 - Prob. 24APACh. 13 - Prob. 25APA
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