eco204_summer_2009_practice_problem_19

eco204_summer_2009_practice_problem_19 - University of...

This preview shows page 1. Sign up to view the full content.

This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: University of Toronto, Department of Economics, ECO 204. Summer 2009. S. Ajaz Hussain ECO 204 Summer 2009 S. Ajaz Hussain Practice Problems 19 Please help improve the course by sending me an email about typos or suggestions for improvements Note: Please don't memorize these solutions in the expectation that similar questions will appear on tests and exams. Instead, try to understand how to derive the answer as you'll be tested on techniques and applications, not on memorization. Moreover, tests and exams will cover topics and techniques that may not be in these practice problems. You are urged to go over all lectures, class notes and HWs thoroughly. Question 1 Ajax has the demand curve P = 100 10Q and MC = 20. Calculate the price, quantity, Consumer surplus and gross profits for the following scenarios: (a) if Ajax is a price maker charging uniform prices (b) if Ajax is a price taker and (c) if Ajax is a first degree price discriminator. Question 2 (2007 2008 Final Exam Question) A private golf club "Drones" (an ode to P. G. Woodhouse 1 ) attracts two types of golfers: serious and casual. Suppose there are 10 serious and 100 casual golfers in Drones' market. Each serious golfer has demand curve, Qs = 350 10P and each casual golfer has demand curve Qc = 100 10P, where Q is number of rounds played per year, and P is price per round. Suppose there are no fixed costs and the marginal cost of playing golf is \$5 per round. (a) Suppose Drones decides to charge serious and casual golfers a common uniform price for playing a round of golf calculate this price. What will Drones' profits be? Show all calculations clearly. Hint: the serious and casual golfers are being treated as a single market. (b) Suppose Drones decides to charge serious and casual golfers different uniform prices for a round of golf. Calculate these prices. What will Drones' profits be? Show all calculations clearly. (c) The club decides to charge golfers a single membership ("access") fee to join the club and a single "usage" price for playing a round of golf. Calculate the membership fee and the price for 1 P. G. Woodhouse authored a number of books. One of his best works was about Jeeves, a "man servant". The series was turned into a TV series starring a very young and very funny Hugh Laurie (of House MD fame). 1 University of Toronto, Department of Economics, ECO 204. Summer 2009. S. Ajaz Hussain a round of golf. What will Drones' profits be? Show all calculations clearly. Check your answer from this Excel model. (d) If Drones can negotiate the price of a round of golf with each player, how many rounds of golf will the serious and casual golfers play? What will Drones' profits be? Show all calculations clearly. 2 ...
View Full Document

{[ snackBarMessage ]}

Ask a homework question - tutors are online