solutionwk8 - 1. Chris runs a movie theatre in the town of...

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1. Chris runs a movie theatre in the town of Smallburg. She is thrilled to be showing Peter Jackson’s long awaited film, “The Hobbit.” The demand and marginal cost for tickets to the movie are given below Q P MC D Q c P c MR P m Q m (a) Suppose that Chris runs the only movie theatre in the town but she behaves like a price-taker . (Hint: as Chris runs the only movie theatre, her supply is also the market supply curve) Illustrate above how many tickets Chris would sell and for how much. See P c and Q c above. (b) Suppose Chris realizes that she runs the only theatre in town and that her supply decision influences the market price. Draw the marginal revenue curve above. Also, illustrate above how many tickets Chris the Monopolist would sell and for how much. See P m and Q m above. (c) Illustrate above the deadweight loss associated with Chris’ behavior as a monopolist. Explain why there is deadweight loss. The deadweight loss is the area shaded blue. There is deadweight loss as the monopolist produces less quantity than the socially efficient level. There are still more sales that the monopolist can make where marginal value is greater than marginal cost (MV>MC).
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(d) The Smallburg movie clientele consists of young college students and elderly retirees. Explain how Chris might use this information to
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This homework help was uploaded on 04/19/2008 for the course ECON 11 taught by Professor Woglom during the Spring '08 term at UMass (Amherst).

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solutionwk8 - 1. Chris runs a movie theatre in the town of...

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