Economics: Private and Public Choice (MindTap Course List)
16th Edition
ISBN: 9781305506725
Author: James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher: Cengage Learning
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Question
Chapter 24, Problem 14CQ
(a)
To determine
Filling of table with total revenue, marginal revenue, fixed cost and total cost.
(b)
To determine
Maximizing profit by charging price of $55
(c)
To determine
Price charging and output produced for maximizing the profit by estimating the
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Students have asked these similar questions
You run a game-day shuttle service for parking services for the local ball club. Suppose you are compensated $30 per customer, per ride. In other
words, your marginal revenue is $30. Your costs for different customer loads are summarized in the following table.
For each customer load, calculate both the marginal cost and the average cost. Then answer the question that follows.
Note: Round your answers to the nearest cent.
Total Cost Marginal Cost
($)
Customers
1
2
3
4
5
6
7
8
$30
$45
$75
$120
$180
$255
$345
$450
($ per customer)
$15
$30
$45
$60
$75
$90
$105
In order to maximize profits, you should carry 6
Average Cost
($ per customer)
$
$30.00
customers per load.
You run a game-day shuttle service for parking services for the local ball club. Suppose you are compensated $30 per customer, per ride. In other words, your marginal revenue is $30. Your costs for different customer loads are summarized in the following table.
For each customer load, calculate both the marginal cost and the average cost. Then answer the question that follows.
Note: Round your answers to the nearest cent.
Customers
Total Cost
Marginal Cost
Average Cost
($)
($ per customer)
($ per customer)
1
$30
2
$36
3
$48
4
$66
5
$90
6
$120
7
$156
8
$198
In order to maximize profits, you should carry customers per load.
FITnest is one of the few fitness centers serving the greater area. The gym has been open for 3 years. It charges a flat price of $25 per visit to its clients, and the firm’s current average cost of production is $10 per visit. (You may assume that average cost has the “traditional U-shape”.)
a) The owners of the gym heard you are studying economics, and they want some advice on how they could possibly increase their profits through price discrimination, which is a concept they have heard of but do not know much about. Provide an explanation of what price discrimination is and give them an example of how they could use group pricing in their climbing gym business. Explain how group pricing works to increase their profit.
b) Given the current situation in the market for fitness in the area, would you expect to see competitors enter or exit the market? Explain.
c) Given the current market conditions, what would you predict to observe in the long run with respect to the demand for…
Chapter 24 Solutions
Economics: Private and Public Choice (MindTap Course List)
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