# Since the total revenue of the airline is 26000 for

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Since the total revenue of the airline is \$26,000 for each day (the 80 passengers for the night flight plus the 50 passengers in the afternoon flight, each paying \$200 for a one-way ticket), it pays for the airline to remain in business in the short run even though it incurs a loss of \$200 per day. Unless the airline could find a more profitable use for the plane, it would incur the larger loss of \$3,000 equal to the fixed costs of the plane if it kept the plane idle. In the long run, all costs are variable and it would be better for the airline to discontinue its Los Angeles to New York service altogether. 11. ( a ) With TFC = \$100,000, P = \$30, and AVC = \$20, At QB = 10,000 and P = \$30, TR = (\$30)(10,000) = \$300,000. ( b ) With TFC = \$100,000, π = \$60,000, P = \$30, and AVC = \$20, At QT = 16,000 and P =\$30, TR = (\$30)(16,000) = \$480,000 Spreadsheet problem 1 Salvatore’s Chapter 9: a. Problems: 7. A 33 percent import tariff on commodity X will shift the foreign supply curve of imports of commodity X to the nation (i.e., SF ) upward by \$1, so that the tariff-inclusive PX = \$4. At PX = \$4, domestic consumers would purchase 500 X (given by the point on DX at PX = \$4), of which 300 X would be produced domestically (given by the point on SX at PX = \$4), and the difference of 200 X between the quantity consumed and produced domestically would be imported (see Figure 9-4). Thus, the consumption effect of the tariff is −100 X , the production effect is +100 X , and the trade effect is −200 X . The nation's government also collects the revenue \$200 (\$1 on each of the 200 X imported).

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This is the revenue effect of the tariff. 11. Authors would like publishers to maximize total revenue. This occurs where the demand curve for book sales has unitary price elasticity. Publishers, on the other hand, want to maximize total profits, which occurs where MR = MC (and MC is rising). Since MC is positive, MR is also positive (i.e., the publisher operates on the inelastic portion of its demand curve). Thus, there is a basic conflict between the interest of authors and those of publishers.
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• Spring '13
• GeorgeYoung

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