Ps8_fall11 - Department of Economics Columbia University 1 2 3 4 5 6 7 8 9 W3211 Fall 2011 P r ob l e m Se t 8 I n t e r m e d i a t e M i c r o e

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
Department of Economics W3211 Columbia University Fall 2011 Probl e m S e t 8 Int e rm e diat e Mi c ro ec onomi c s Prof . S e yhan E A rkona c 1 . Consider a town with a single movie theater, and that movie theater faces a downward sloping demand curve for its tickets. The movie theater has a fixed number of seats available for each show but the marginal cost of filling a seat is zero. Why might it be in the movie theater’s interest to not to sell out every show even though the marginal cost of selling additional seats is virtually zero? (A graph will help your answer). 2 . A monopolist faces the (inverse) demand for its product: p = 50- 2Q. The monopolist has a marginal cost of 10/unit and a fixed cost given by F. (a) Assume that F is sufficiently small such that the monopolist produces a strictly positive level of output. What is the profit-maximizing price and quantity. (b) Compute the maximum profit for the monopolist in terms of F. ( c ) For what values of F will the monopolists profit be negative 3 . For profit-maximizing monopolies, explain why the boundaries on the Lerner Index are 0 and 1. 4
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 01/16/2012 for the course ECON W3211 taught by Professor Elmes during the Fall '09 term at Columbia.

Page1 / 2

Ps8_fall11 - Department of Economics Columbia University 1 2 3 4 5 6 7 8 9 W3211 Fall 2011 P r ob l e m Se t 8 I n t e r m e d i a t e M i c r o e

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online