ECON 426 Chapter : New Evidence on Tax Incentives and Fertility"
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An amusement park, whose customer set is made up of two markets, adults and children, has developed demand schedules as follows:
The marginal operating cost of each unit of quantity is $5. Because marginal cost is a constant, so is an average variable cost. Ignore fixed costs. The owners of the amusement part want to maximize profits.
Price ($) |
Quantity |
|
Adults |
Children |
|
5 |
15 |
20 |
6 |
14 |
18 |
7 |
13 |
16 |
8 |
12 |
14 |
9 |
11 |
12 |
10 |
10 |
10 |
11 |
9 |
8 |
12 |
8 |
6 |
13 |
7 |
4 |
14 |
6 |
2 |
Calculate the price, quantity, and profit if: The amusement park charges a different price in the adult market
Please express your answers for Price and Profit in whole dollars (i.e.10.00)
Please use whole numbers for Quantity (i.e. 10, 27, 4)
Price |
Quantity |
Total Revenue |
Marginal Revenue |
Marginal Cost |
Total Cost |
MR-MC |
Profit |
6 |
84 |
5 |
30 |
34 |
|||
13 |
91 |
7 |
5 |
35 |
2 |
56 |
|
12 |
8 |
96 |
5 |
5 |
40 |
0 |
|
9 |
99 |
3 |
5 |
45 |
-2 |
54 |
|
10 |
100 |
1 |
5 |
50 |
-4 |
50 |
|
9 |
11 |
99 |
-1 |
5 |
55 |
-6 |
|
12 |
96 |
-3 |
5 |
60 |
-8 |
36 |
|
7 |
91 |
-5 |
5 |
65 |
-10 |
26 |
|
6 |
14 |
84 |
-7 |
5 |
70 |
-12 |
|
5 |
15 |
75 |
-9 |
5 |
75 |
-14 |
0 |
PROBLEM SET ONE -2 - PRICE-ELASTICITY OF DEMAND
| P1 | P2 | QD1 | QD2 | I | II | III | IV | V |
1 | 1 | 2 | 10 | 5 | |||||
2 | 5 | 3 | 40 | 90 | |||||
3 | 12 | 20 | 200 | 200 | |||||
4 | 3 | 2 | 9 | 9 | |||||
5 | 0.40 | 1.40 | 30 | 15 | |||||
6 | 1.2 | 4.0 | 20 | 15 | |||||
7 | 7.5 | 4.6 | 40 | 30 | |||||
8 | 5 | 5.000â¦01 | 1x106 | 0 | |||||
9 | 5 | 4.9999â¦. | 10 | 1x109 | |||||
10 | 6 | 12 | 12 | 6 | |||||
11 | 18 | 36 | 360 | 180 | |||||
12 | 7 | 15 | 24 | 16 | |||||
13 | 7 | 16 | 78 | 78 | |||||
14 | 25 | 65 | 150 | 100 | |||||
15 | 65 | 91 | 1300 | 780 | |||||
16 | 4 | 5 | 21 | 11 | |||||
17 | 8 | 4 | 30 | 54 | |||||
18 | 140 | 275 | 625 | 495 | |||||
19 | 78 | 91 | 780 | 780 | |||||
20 | 91 | 78 | 780 | 780 |
Column I - determine the Price-Elasticity of Demand Coefficient. Find material in Chapter 6 and the Powerpoint of Elasticity Chap 004 19e.ppt
change in quantity demanded change in price
ED = ---------------------------------------- â ----------------------------
sum of quantities demanded / 2 sum of prices / 2
The data in the first four columns represent price (P) and quantity demanded (Qd) in time 1 (before change in price) and time 2 (after change in price). Note that results should be expressed in absolute terms (see paragraph Elimination of Minus Sign). For example, -1 should be expressed as â1â.
Column II â Based on topic concerning Interpretations of ED, indicate which applies based on how the quantity demanded changed subsequent to a change in price (elastic, inelastic, etc.)
Column III - you need to determine if the good in question would be considered a necessity, a luxury or neither.
Column IV â Indicate, in monetary terms, how much is the change in total revenue or total expenditure (TR = P X QD), from the first price level to the second.
Column V - the direction of the change, also in monetary terms, that is, increasing or decreasing, and by how much? (show a + sign for increasing and a â sign for decreasing).
Note: for any monetary result please include the applicable currency symbol ($, â¬, etc.)
1. ExpIain with the heIp of graphs h0w a flrm mlnlmlzes costs in the long run
2. Draw a graph 0f a market for a flrm ln a perfectIy competltive lndustry. lndicate the short run profit maximizing quantity and the profits for the firm. Explain with equations.
3a) ExpIain what the deadwelght Ioss of a non-discriminating monopoIy is with words and graphs.
B) Why is the Iong run equilibrium under perfect competition more effecient than monopoIy?
4)
Quantity | Fixed Cost | Variable Cost | Total Cost | Marginal Cost | Average Fixed Cost | Average Variable Cost | Average Total Cost |
0 | $30 | $0 | $30 | 0 | 0 | 0 | 0 |
1 | $30 | $30 | $60 | 30 | 30 | 30 | 69 |
2 | $30 | $48 | $78 | 18 | 15 | 24 | 39 |
3 | $30 | $57 | $87 | 9 | 10 | 19 | 29 |
4 | $30 | $64 | $94 | 7 | 7.5 | 16 | 23.5 |
5 | $30 | $85 | $115 | 21 | 6 | 17 | 23 |
A) At what point will the MarginaI Cost Curve lntersect the ATC?
B) At what point will the MarginaI Cost Curve lntersect the AVC?