Chapter 10 Homework
Consumer Compensation. Suppose your college grants Coca-Cola a monopoly in selling soft drinks on campus. Your job is to compute how much each student should be paid to compensate for his or her consumer cost of the monopoly. Suppose Coca-Cola increased the price of soft drinks by $0.10 per can and each student consumed 8 soft drinks before the monopoly was granted. a. Kate continues to buy 8 soft drinks at the higher price. What is the appropriate compensation? $0.80 (enter your response rounded to the nearest penny). b. Elise buys only 2 soft drinks at the higher price. Her demand curve is linear. What is the appropriate compensation? $0.50 (enter your response rounded to the nearest penny).
0.80 0.50
Restaurant Pricing. Consider a restaurant that charges $ 20 for all you can eat and has 20 customers at this price. The slope of the demand curve is minus $0.20 per meal, and the marginal cost of providing a meal is $6 . Hint: The y-intercept equals the charge plus the (absolute value of the slope times the number of customers), and the x-intercept equals the y-intercept divided by the slope. 1.) Use the line drawing tool to draw and label the demand line. 2.) Use the line drawing tool to draw and label the marginal revenue line. 3.) Use the line drawing tool to draw the marginal cost line. Carefully follow the instructions above, and only draw the required objects. The profit-maximizing quantity is 45 meals. (Enter your response rounded to the nearest unit.) The profit-maximizing price is $15 . (Enter your response rounded to the nearest dollar.)
45 15 draw a horizontal line at y=6 then name it Marginal cost. draw two lines that start from (0,24) the one on the left ends at (60,0) then call it marginal revenue, the line on the right ends at (120,0) then call it demand
At a price of $18 per CD, a firm sells 60 CDs. If the slope of the demand curve is minus $0.20 , marginal revenue for the 61 st CD is $5.80 . (Enter your response rounded to the nearest penny.) The firm should cut the price to sell one more CD if the marginal cost is less than $5.80 . (Enter your response rounded to the nearest penny.)
5.80 5.80
If a monopolist wants to increase the quantity sold from 2 units to 3 units, it cuts the price from $ 12 to $ 10 . The marginal revenue = $6 . (Enter your response as a whole number.)
6
Suppose a firm starts with a single price and then switches to a price-discrimination scheme. The firm will lower the price for the group of consumers with the more elastic demand and raise the price for the group with the less elastic demand.
lower raise
