C7answers

C7answers - 1. if demand is inelastic, marginal revenue...

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Unformatted text preview: 1. if demand is inelastic, marginal revenue exceeds average revenue. {Hint Average revenue is total revemie divided by quantity}. Answer: Faiss 7 fififi, .JLLZJSJIERI-Létfi; {-49 1'53?!“ "UN'LHL‘ rfiwli'fi ET L.- riIL-t-{Jrvrsvl- ._,3'LC1{.-E-ryiaL-LE_ 1- {ALL “fiat-L 'Lo-I' -'1.,.i.r,r.r;~1 'riL'rfis-EA'd-’ --‘~'—'=LC~'3‘3'—flii~’d "1* L91" “Lafmi'é‘” -._JT Ig-‘EC'T': iii/iii, , 2. if the marginal revenue from selling one more unit is greater than the marginal nest of producing that unit. then a menepelist can increase its profits by increasing its eutput. Answer: True r’rf I1 -—I- ' _ I_|_ : I IL I! an (Lilli, I”. afirfiia ‘fi’fififfiffiilel xffi-QL.- . [atrial-Lew- 1'” ‘3‘" E. I I r ' - "‘ " fit ’1' '3' .a' - '1" ' .r" I (-1 - J III ' I. - r'lll r!‘l 3.x".- ij-Ei Lift-ff It} [flifiuflrf r Ii-“f “171.sL-'L-‘i§'i'h1f£,2 .» LJ— 1.11: f)- ? 3 - _ 5({1 :fJ-‘iirI 13L "firfi- .n: mil" git—n fi-“fLfliinfidéP m L i" “ ' “3* ' J .r r. f I! .- .- "' j .- Elsa-KIA Jingle. 332mm, £5,111! 4-"? U5 “mit- f‘; '* r I we}? fl' -1’-{.-‘-i’.-i’£|—{-H alerts-Lassie: , .- .- J .- ' __.- 3. A mcncpclist practicing pcrfcct price diccrimincticn sells fcwcr units than a mcncpclist that charges a single pricc. Answer: False {533. ’iw'Lm-uzsrficflcc-f fif-‘l‘rf'iff'iafi‘fi‘r $7‘9'g'i13é44'f “F7171 “a” _. , .. . -,,*—- _ ,. at ,ur “{de ..-:-"'4f.{«Evil-«Liv‘HrLL-i-Lcw."L-LtL-‘IL- .-c/(fi.-'-.ei;u-:1—.i-L 'b'tbfii ("V Lfl" I _,. 3' u r J t f.— - -f,"'l':*.. _ . . .- f r f'.-T_-_— .-."_,-1’__fl_ {411-1.}- .gfxtJ.-_j_. rg¢¢.uf{;w1u.-1_-. 533'— J{:€"¢£’L ' -‘I F " -",_ .l .1.“ I -' 41?]: .j'.‘ 4/113” 93,? .1 mfch J f5: rig-L .. r, ._-:.{L1,.-.(: . «fl-Lt! maize-t. «C, minim- . ‘P .I- .|- - r; _.1 "'_ _ J I. . _ at- .4! II __, .1 If): . _I}.‘_ _ “I.- I-(. I J} _ A; l- tLj’LE'c-Tfj 1,; --f_#’~tz.m “’3 r hit #3?“ “' 5- ' J . ‘I .I- ' . . _ .3: r; Ir} .u'..' I //_,1_r _I:r_,-d_..;r“.?_l I _.€{4-___:lr{ (in: if J flirt-1E {3-h— rr-l. r’Jfl-t 14- 1'1,r_'3"f:-'_{.' Lia-Pf]— '11.}‘C£ —:;.'- ' “- r' L '5 ‘ ' A J J 1' l H I .frchficri-tef Edi-4,131. ifs-fatten: ac--<E«{-¢*cii#' 5" “iii!” ‘L'L “(5657' 4. A monopolist faces a demand function that can be described by the equation P=505-15Ei where F is the price that the monopolist charges per unit of output and i1 is the number of units that the monopolist can sell at that price. The monopolist's total costs are 250 and its marginal cost Is 25. The following expression expresses the monopolist's profit as a function ofths number of units sold: {a} 5D5-15Q-25 (b) EDS-311D [c]43tiCl—15Q"2 {ti} SHEEN sons-15 to) None of the above {Note ENE means flwsquaredj (Hint: Profit ls Total Revenue Minus Total Cost} Answer: C . r' rdx.‘ _ '."."I. r— ,-‘_|.'-1'_1';_ Ir :' "ti. |'_1':'.:'_' . " g." '-| 5. The menepelist found in the previews problem has a marinal revenue curve that is described by the equation [where MR stands for marginal revenue}: {a} MR=5fl5-15Q (In) MR=5u5-25a [c] MR=52D+25Q {a} MR=5u5-3ea {a} MR=53fl~4fiQ Answer: D a .l I. l-' '_-' - '1 ;I -' J— "._'lll.'-' d; 'IrLI'Ii-1t-Ir'l‘r-Ll-{:- fr‘l f”: P"-—.-_;'__ '_.«' {I f — Lit. J '-"'J if f- .' I” lif—IL- I a — L I ' 4," u h It _ I I" —,r I _____ : 4151— L'- — "IL-r r_ {} r'L-‘Jrh. — I_-' 'IH 1' I all LJ’JJ (95‘- L ‘ I ‘ rldli‘Ff I: 'r-— -' (LA E. Where quantity is measured on the horizontal axis and dollars on the vertical axis. the marginal oost more of the monopolist of the previous two probienis is (all an upward-sloping line through the origin with slope 25. (In) a horizontal line at a height of 525. [o] a vertical line at a quantity of E1. [til an upward-sloping line through the origin with slope 51".}. {e} a vertical line at quantity it? Answer: B -" -r- - ' -r -"_ I . .-‘ . . , -:- ._ ' .. _ .'. . .- -.- a- ';1_ ;-‘---' P,{.-1l.-.I.IIIJ_" 5.13:2.— ‘I'Iil I. i Xvi/k] L 1'" -'-..a— {—J " f' - _ l-a!‘ 'I _ "r II‘ I i L r _' 5—2- . i .'_"_ .- I -- 4-”. :r‘ .'rL"- I.:'r‘ If:- . L-L' .- .-.. _ — r . L< ' f" x I _ n x Iii-11': I'- ir 1' v- .21 a l: '-' *F I. J-L r '1 I" 1' L 1 L if. K ,— f" I J I ’ 1r 1 1 J 'J ' | 5] ‘- ' I) " H 2' r _ a :J_ I “J's... " '. " “4‘ #5th {fir-{.I'F LL ‘ r {I ._ _ .- ..., i J J a " .. . ' 3-" r J_-.. ‘—- r’x" ' CLI- {s'l— '_;;L:.- L' -'J---'r‘_r r f r {5* L" *‘f ‘-- - _:~'L,ff,-i-'J-L,.r,--_- L. - -- a- -,.- . .- .: ,- J TH- _ . _ N”? ....-; z:;'.-' ,. I.- -‘l",-J"'{l~;i.§i_c-’I.L- H.914 Ii/T'L‘Kvfii-J-wfr‘T-ia' - ' "J' ‘ "' ‘ ' ’ ' _ II. :1.“ a T. In order to maximize its prafits, the manapaly of the preceding questions should sell a quantity of {a} 32 units [h] 15 units {e} 165.5? unite {d} 33.33 units {e} {H} units (Hint: For what quantity {leee marginal revenue equal marginal cost?) AHSWE r: E’- j I i.‘ _ I — _ - I _ rn‘jlrm‘ ,r' 1L — _ ._ _ I. If” ",4._',: |.. |_| r I E". '.'_"’__ I Ill-a, _.;' I 5 It“. __L.|_i..‘ _ : '— .. L . .. {gnu-u . i l L. FaiiLE-i L’ _.f u. HIE.— L. L av U.“ " * '- '5:- | r r -' . .-""- , .“1 .r x * :IP:'_ '5; r inifiifia 41?" J'i: jam ’1'—’_,WL‘L:.f-'J'-l'-'" f n " ‘ " ' ' " ' I i_,-' ._. '- . — :_r' rd "Ft-— P” l {Fl-L1: L If. if! If); "Ll—3H.“ £121.”) 4 in. F2 _ u L Ihl ‘JJH . u: I; L? if“, __ V _. . .. L, . v . i , ' ._ ‘1' 1 rd _I .— II .' LI r 3'. "-J B. Bozoworl-rs, a software company, has exclusive rights to sell the game Space Morons. Bozoworks spent $250!] getting the program ready to market. Its only remainlng costs are the cost of distributing the copies of Space Morons to buyers. This costs $5 per copy. if Eozoworks sells Q copies. its total costs will be $25flfl+5fl. Nobody Is willing to pay more than $90 for a cepy of Space Morons. lf Bozoworl-ts offers to sail Space Morons at price p. all buyers with buyer values of p or greater will buy and all buyers with buyer yalues below p will not buy. There are 3? demanders who have buyer values of $90 for a copy of Space Morons. For every dollar that the price falls below 59!], Space Morons picks up one more buyer. Thus there is “i demander with buyer value SEE]. one wlth buyer yalue $33. one with buyer value 53?, and so on. Bozoworirs' rnarginai reyenue from increasing its sales from 3? to 33 i5: {333913 {b} $3.3m is} $45 [11} $52 [e] $13G Answer: [i 9. Which oftho following formulas givas the highest price at which Bozoworlcs can ooll 1: oopios of Space Morons, whore 3?<Q<12?? [a] F=9fl~2Q {b} P=12‘r-fl {o} P=9flu2||§1 (d) P=9fl-Q to} Mono oftho above Answer: B‘- _. .- It]; ,_€er_ ' ' ' . f, _ r, _|E_... no r- r. . - ' . -- 1 .--. x "-; _ MTTS'Kd-y : a ' 7L E. iii-(irij ['-"}"|_L:' . "LL"; Hrs '"i-‘rr LL Lin-t.”- -.‘.'-_', "-" I‘- ll! - '1 LJ .4 - -' .-'. .. - . . -: f- at“; .. 7 ;.-‘ J " r” "—I"- _: .- _. (a: . _;:.-H:.-E_.-t.lé ,. L.L o}. L J;’-liL(-l,.-jr_f J: I _. {v.(.(._J ., .._n_- 1:} .'.-' [3 --I .H -- o, r .5g_,;{ [La-:1:- ' 'r —- . I in? 43—. - .. / on L ,f; I‘- (L I} /| {Lth (-“lL-"N‘flrr II/I ?' J’r r r-" u - f. ’- 11:" iii—3:15.“ LL [Jr (L11 Jlfi “fl :1. (If! *L...----‘--’-"‘LI.’r r J _.. 'J '1; .f 1-0. _ _ . -- o" -. *- .- ' 12:15:32! r-t I‘l-r r r,— 2' urli _/_.f'll':,. :i'J-J : H Jill—4" I. {‘12 J r 'r I - ‘11-! .-'.':\r_r_)1L-_fifj-LH{-IJ- 3.1—”: L "ii I __ .4- ri , f _ :9— 1 kg ,--. fij-1u'-j~,_.;.'_-.-','.-{.i'_' L.‘ '»-'+']-'!.L-‘_.L—=‘{, J (1-6.3:— "L {w‘LifL‘r-é» -"L.J.r.3-t1r-o'~:¢ HL-Li" w _r“ u . 10. Fox Cable is the onlyIr television cable companzlr in Santa Barberia. Twenty families are willing to payr $53 per month for cable television. 4!} are willing to pa};r 540 per month. 4B families are willing to pajlr 525 per month, and 1'5 families are willing to pay $51!} per month. The cost of providing cable service to a house is $20 per month. If Fox Cable were able to practice perfect price discrimination, how much profit could it make per month? {a} $1,000 {0] $2,000 {c} $1.200 is) 5000 {el $201] Answer: A W F a ' . -. _. -. ' - -.- -" ..-- . 1 . r a I" C?”— JII-I'i": '1: a ml {3 '{ LI ‘ Ki 4: A .{T't' -L-(:||.; '44. -’“~- I U- *}‘-’-- '3; i 4/: r L r' 'fo {— rgn— L 1" J t .1 ._ L r_ .1_ L I_ C '_ 'l—z I}; ii? {EL-L" _ i .. . * w—../ .a r J J 04?}. i stain: [ Lib-(’5. _-.i- rein-Hr» ’ i— L? " I! / (L “I Lil? .- --+ , 1- .a .' . _‘ _{..."I'--..'_i1 vi],- _ ' If" __('[-fl.:£-_l_ 4_'__(_,l:__ Klift-ff.Pit-5.i.'.-I_ L-__1_. iffy.” {21.- 'i.-- 1-1 FJPI; I. "C..-'.:‘2.-t.-‘{_I'_.-;._ J51.-i,i‘fr't;»~'i5.r its: or. x if t't'Ll-Jf J’u L ‘r »_ I 5 1-. if" ‘1 iii“. ’— d a I if!" a luff-{Jib k. I 4-2;: {Tc-iii: iii.- c'fi'? fi-E-JL'F}: L: EEL- "'—--"i-"t‘- rfif‘i‘iifi‘ - LI: lir- I-H. ll r if”. ijJIL E ."l‘ _ I l 1—i- Ibll-i't; leLL’II'I” "ii-11f ‘l'i'ifLL‘JJ-I H II. ."_ 3 Fl- “‘fl' 3 sir: I' QC} "-3 c '4 :5 + 'sflfl I:I I I. I ‘ Lr- r: I.I".I I LT- If 3‘1) J1! |:: I? gig‘fil fr Li'i'fi' I 1'. v | —.._ I I . 0' I .I/ I "L.- beJt-"J ...
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This note was uploaded on 10/12/2008 for the course ECON 1 taught by Professor Bergstrom during the Spring '07 term at UCSB.

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C7answers - 1. if demand is inelastic, marginal revenue...

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