Microeconomics (7th Edition)
Microeconomics (7th Edition)
7th Edition
ISBN: 9780134737508
Author: R. Glenn Hubbard, Anthony Patrick O'Brien
Publisher: PEARSON
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Chapter 6, Problem 6.3.8PA

Sub part (a):

To determine

The price elasticity of subway pass.

Sub part (b):

To determine

The impact of increasing the price.

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Imagine that you run the toll authority for a city bridge. You must charge all of your customers the exact same toll. Initially, you have set the price at $2 per trip. The blue line on the following graph shows the weekly demand curve for trips across the city bridge. On the following graph, use the purple rectangle (diamond symbols) to shade the area representing the total weekly revenue when the toll is $2 on the graph. Notice that when you click on the rectangle, the area is displayed. TOLL (Dollars per vehide) 10 9 8 Demand 3 2 1 0 0 4 8 12 16 20 24 28 32 QUANTITY (Thousands of vehicles per week) 36 When the toll is $2, total revenue is $ 40 TR at $2 TR at $3 (?) An advisor has suggested that if you raise the toll to $3, the toll authority would bring in more revenue. To analyze this, use the green rectangle (triangle symbols) to shade the area representing the total weekly revenue when the toll is $3 on the graph. per week, but when the toll is $3, total revenue is $ per week.…
Imagine that you run the toll authority for a city bridge. You must charge all of your customers the exact same toll. Initially, you have set the price at $2 per trip. The blue line on the following graph shows the weekly demand curve for trips across the city bridge. On the following graph, use the purple rectangle (diamond symbols) to shade the area representing the total weekly revenue when the toll is $2 on the graph. Notice that when you click on the rectangle, the area is displayed.   An advisor has suggested that if you raise the toll to $3, the toll authority would bring in more revenue. To analyze this, use the green rectangle (triangle symbols) to shade the area representing the total weekly revenue when the toll is $3 on the graph. When the toll is $2, total revenue is _________ thousand per week, but when the toll is $3, total revenue is_________ thousand per week.   Based on your analysis, you can conclude that your advisor is ________ in suggesting that…
Q. A woman complained to “Dear Abby” that a laundry charged $1.25 each to launder and press her husband’s shirts, but for her shirts—the same description, only smaller—the laundry charged $3.50. When asked why, the owner said, “Women’s blouses cost more.” Abby suggested sending all the shirts in one bundle and enclosing a note saying, “There are no blouses here—these are all shirts.” a. Is the laundry practicing price discrimination, or is there really a $2.25 difference in cost? b. Assuming the laundry is engaging in price discrimination, why do men pay the lower price and women the higher? c. Could the laundry continue to separate markets if people followed Abby’s advice? What about the policing costs associated with separating the markets?

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Microeconomics (7th Edition)

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