# ps3 - Economics 101 Introductory Microeconomics Fall 2007...

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3d94a5f9c0815e85c982b62adbc3c8039d399d73.xls Q1 2 Price Total Cost Profits 6.50 0 6.00 1,000 5.50 2,000 5.00 3,000 4.50 4,000 4.00 4,800 3.50 5,600 3.00 6,400 2.50 7,200 2.00 8,000 1.50 8,800 1.00 9,600 0.50 10,400 Cr ê pes in Universityville Total Quantity Demanded Marginal Cost Total Revenue Marginal Revenue Question 1 Monopoly Larry runs the only crêpe stand in his hometown of Universityville. Larry faces fixed costs of \$5,000 per year, and for each crêpe he makes, it costs him an additional \$1.00/unit. The table below shows the annual demand for crêpes in Universityville. a) Complete the table below. b) At what price is total (consumer plus producer) surplus maximized? What are Larry's profits at this price? c) What price does Larry charge for a crêpe in order to maximize his profit? What are Larry's profits at this price? d) Graph marginal costs, marginal revenue, and quantity demanded on a supply and demand diagram. Illustrate the surplus-maximizing price and quantity, the profit-maximizing price and quantity, and the deadweight loss associated with monopoly production.

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3d94a5f9c0815e85c982b62adbc3c8039d399d73.xls Q2 4 Universityville Crêpes Price 5.00 1,800 1,200 4.50 2,200 1,800 4.00 2,400 2,400 3.50 2,600 3,000 3.00 2,800 3,600 2.50 3,000 4,200 2.00 3,200 4,800 1.50 3,400 5,400 1.00 3,600 6,000 0.50 3,800 6,600 Non-students in Universityville Price 5.00 4.50 4.00 3.50 3.00 2.50 2.00 1.50 1.00 0.50 Students in Universityville Price 5.00 4.50 4.00 3.50 3.00 2.50 2.00 1.50 1.00 0.50 Quantity demanded by students Quantity demanded by non-students Quantity
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ps3 - Economics 101 Introductory Microeconomics Fall 2007...

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