Problem set 4 Spring 2007

# Problem set 4 - Name Problem Set#4(due Monday 10/23 1 The owner of a new movie theater complex is trying to decide how many screens to build The

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Name: ________________________________ Problem Set #4 (due Monday, 10/23) Page 1 of 4 1. The owner of a new movie theater complex is trying to decide how many screens to build. The cost of construction is \$1,000,000 per screen. The owner is borrowing from the bank at some real interest rate to build the movie theater complex. Listed below are the number of patrons the complex will attract, depending on the number of screens: Number of Screens Total Number of Patrons per year Increase in Patrons for each Screen Marginal Revenue of each Screen 1 40,000 2 75,000 3 105,000 4 130,000 5 150,000 a. Suppose that after paying the movie distributor and all other noninterest expenses the owner expects to net \$2.00 per ticket sold. Fill in the the last columns of the table above. b. If the bank is charging a real interest rate ( R ) of 4.5 percent, how many screens will be built. c. If the bank is charging a real interest rate ( R ) of 5.5 percent, how many screens will be built. d.

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## This homework help was uploaded on 04/18/2008 for the course ECON 100 taught by Professor Kasilwal during the Spring '07 term at CSU Long Beach.

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Problem set 4 - Name Problem Set#4(due Monday 10/23 1 The owner of a new movie theater complex is trying to decide how many screens to build The

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