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Answers to chapter 10

Answers to chapter 10 - Solutions to End-of-Chapter...

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Solutions to End-of-Chapter Exercises Chapter 10 [25] Section 10.1 [25.1]: The Monopolist's Output Decision 1.1 arrow down, arrow down 1.2 $11.90, $11.90 1.3 arrow up 1.4 marginal revenue, marginal cost 1.5 arrow down, arrow up 1.6 marginal revenue and marginal cost 1.7 a. The publisher picks the quantity where MR = MC = $20. The quantity is 100 and the price is $40. b. The author doesn’t care about costs, and picks the revenue-maximizing quantity where MR = 0. The quantity is 150 and the price is $30. c. The author does not bear any cost, so picks MR = 0 rather than MR = MC. d. Profit sharing: Give authors a share of profit instead of revenue, and they will want to maximize profit rather than total revenue. 1.8 To maximize profit, sell 50 meals for $8.00 each. 1.9 a. The objective is to maximize total revenue, where MR = 0. The quantity is 6,000 and the price is $6. b. Leave 2,000 seats empty. This is necessary to maximize profit. c. Price discrimination allows a firm to cut price to attract new customers without cutting prices for old customers.
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