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201Spring2011HW1b

201Spring2011HW1b - Problem Set 1 Due on Monday May 9th...

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Problem Set 1. Due on Monday May 9th, 2011. Microeconomic Theory 201, Spring 2011, University of Waterloo Questions marked with THINK are the most challenging. Question 1. Henry°s total willingness to pay schedule for DVDs is 11 for 1 DVD 21 for 2 DVDs 30 for 3 DVDs 38 for 4 DVDs 45 for 5 DVDs 49 for 6 DVDs 49 for 7 DVDs Henry can only buy DVD°s at MovieMax. a) How many DVDs will Henry buy if the price of each DVD at MovieMax is $5 ? b) THINK How many DVDs will Henry buy if MovieMax only sells DVDs in pairs and the price of each bundle of two DVDs at MovieMax is $10 ? Question 2. Assume that the demand curve for candy bars is D ( p ) = 100 ° 3 p , where p is the price of a candy bar Candy bars are produced and sold by a monopolist with the cost curve C ( q ) = 2 q; where q is the quantity of candy bars produced. a) Write the expression for the monopolist°s total revenue. b) Solve for the monopolist°s marginal revenue. c) Solve for the monopolist°s marginal cost.
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