Managerial Economics: A Problem Solving Approach
5th Edition
ISBN: 9781337106665
Author: Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher: Cengage Learning
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Chapter 14, Problem 6MC
To determine
Total profit.
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Jonny and Chen Brad Baxter have just made a documentary movie about their basketball team. They are
thinking about making the movie available for download on the Internet, and they can act as a single-
price monopolist if they choose to. Each time the movie is downloaded ,their Internet service provider
charges them a fee of $4. They are now arguing about which price to charge customers per download.
The accompanying table shows the demand schedule for their film.
Price per download
Quantity of download
demanded
$10
8
1
3
4
10
15
a. Calculate the total revenue and the marginal revenue per download.
b. They are proud of the film and wants as many people as possible to download it.
Which price would they choose? How many downloads would be sold?
c. They want as much total revenue as possible. Which price would he choose? How
many downloads would be sold?
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…
what are pricing tactics and examples? What are some forms of price discriminations?
Chapter 14 Solutions
Managerial Economics: A Problem Solving Approach
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- Jonny and Chen Brad Baxter have just made a documentary movie about their basketball team. They are thinking about making the movie available for download on the Internet, and they can act as a single-price monopolist if they choose to. Each time the movie is downloaded, their Internet service provider charges them a fee of $4. They are now arguing about which price to charge customers per download. The accompanying table shows the demand schedule for their film. Quantity of download demanded Price per download $10 8 3 4 6 2 10 15 d. They want to maximize profit. Which price would he choose? How many downloads would be sold?arrow_forwardMarcella owns a sandwich shop. She decides to charge different prices to groups of customers. She targets one group of potential customers by giving them a discount coupon and the other group gets no coupons. Which of the following would be a characteristic of the group that does NOT receive the discount coupon? They _____ than the potential customers who receive coupons. Select one: a. have a lower reservation price b. have a more elastic demand c. receive equal marginal benefit from the product d. have a less elastic demandarrow_forwardThe table shows the demand schedule of a monopolist. Calculate marginal revenue and fill in the revenue column in the table Assume that output can only be sold in integer amounts (i.e., 1 unit, 2 units, etc.). Once you have filled in marginal revenue identify the quantity produced by the monopolist in this market Not all numbers in the answer bank will be used. Quantity Price Marginal revenue Marginal cost Answer Bank 1 $13 2 $2 $12 $6 $8 $4 $13 $11 $3 $10 $9 $7 $5 4 $10 $4 $3 $2 $12 $5 $9 6 $8 $6 How many units does the monopolist produce? unitsarrow_forward
- Is it feasible to prohibit monopolies in all markets? Does advertising help or hurt consumers?arrow_forwardThe table shows the demand schedule of a monopolist. Calculate marginal revenue and fill in the revenue column in the table. Assume that output can only be sold in integer amounts (i.e., 11 unit, 22 units, etc.). Once you have filled in marginal revenue, identify the quantity produced by the monopolist in this market. Quantity Price Marginal Marginal Cost Revenue 1 $13 $3 MR1 2 $12 $4 MR2 3 $11 $5 MR3 4 $10 $6 MR4 $9 $7 MR5 6. $8 $8 MR6 How many units does the monopolist produce? Quantity:arrow_forwardare monopolies good or bad for consumers?arrow_forward
- Suppose that Nathan Juarez is the only seller of kumquats in a small town. The following graph shows the demand and marginal revenue (MR) curves facing Nathan. You can use the red rectangle labelled Total Revenue (cross symbols) to compute total revenue at various prices along the demand curve. To see the area of the Total Revenue rectangle, scroll over the shaded area with your mouse. You will not be scored on where you place the rectangle. Show Transcribed Text 80 72 64 56 48 40 32 24 PRICE (Dollars per basket) 16 10 8 9 0 8 7 TOTAL REVENUE (Thousands of dollars per year] 6 On the following graph, use the green points (triangle symbol) to plot annual total revenue at prices of $7, $6, $5, $4, $3, $2, and $1 per basket of kumquats. Be sure to use all of the points provided. Line segments will automatically connect the points. 5 Then, consider the quantity of kumquats at which Nathan Juarez's marginal revenue exactly equals zero. Place a grey point (star symbol) on the total revenue…arrow_forwardExplain how bundling is a strategy to deter entry to a market. Provide two examplesarrow_forwardThe table below shows the demand and total revenue for a monopolist. Fill in the "Marginal Revenue" column for the various prices and quantities. Instructions: Enter your answer as a whole number. If you are entering a negative number include a minus sign. Demand and Revenues Price (dollars) Quantity Demanded Total Revenue (dollars) Marginal Revenue (dollars) $250 0 $0 — 225 20 4,500 $ 200 40 8,000 175 60 10,500 150 80 12,000 125 100 12,500 100 120 12,000arrow_forward
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