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Quiz6Answers - ANSWER: The table below shows total revenue...

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Economics 20A Winter 2008 Quiz #6 Answers 1. Explain why an oligopolist will never produce a quantity at which at which its marginal revenue is negative. ANSWER: A firm maximizes profit where marginal cost equals marginal revenue. Marginal cost is never negative, and therefore the profit-maximizing quantity can never occur where marginal revenue is negative. 2. You are thinking about putting on a play to entertain your neighbors and make some money. A play has a fixed cost of $2,000, but selling an extra ticket has zero marginal cost. Here are the demand schedules for your two types of customer: Price Adults Children $10 0 0 9 1 00 0 8 2 00 0 7 300 0 6 300 0 5 300 100 4 300 2 00 3 300 2 00 2 300 2 00 1 300 200 0 300 200 You aim to maximize profit. a. What price would you charge for an adult ticket?
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Unformatted text preview: ANSWER: The table below shows total revenue at each price. Price Quantity of Adult Tickets Total Revenue from Sale of Adult Tickets 10 0 0 9 100 900 8 200 1,600 7 300 2,100 6 300 1,800 5 300 1,500 4 300 1,200 3 300 900 2 300 600 1 300 300 0 300 0 To maximize profit, you should maximize revenue, or charge adults $7, sell 300 tickets, and earn revenue from adults of $2,100. b. What price would you charge for a childrens ticket? ANSWER: The table below shows total revenue at each price. Price Quantity of Child Tickets Total Revenue from Sale of Child Tickets 10 0 0 9 0 0 8 0 0 7 0 0 6 0 0 5 100 500 4 200 800 3 200 600 2 200 400 1 200 200 0 200 0 Revenue is maximized when the price is 4, the quantity sold is 200, and revenue is 800....
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This note was uploaded on 02/02/2009 for the course ECON 62140 taught by Professor Ouyang during the Spring '08 term at UC Irvine.

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Quiz6Answers - ANSWER: The table below shows total revenue...

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