Economics

IIE 286 PART 1 MicroeconomicAnalysis

Exercises

Technieal Questions

a. -5 b. -1 c. -0.5

There are

in total?

,-trveekday to weekend prices? f. ,4. monopolist sells in two geographically divided Ymarkets, the East and the West. Marginal cost is

constartt at $50 in both markets. Demand and mar- ginal revenue in each market are as follows:

nation than a single lrice elasticities, monopoly price)

revenue is positive, that the price elasticitY ofAn airline

demand for ness rs (who travel on price elasticity ofis -2, whil

Tor vacation (who travel on ) is -5. If the discrimlnates

2. Given pnce elasticities,

-15 -8

(j. -J

Suppose a firm has a constant marginal cost of $10. Ttre current price of the product is $25, and at that price, it is estimated that the price elasticity of demand is -3.0. a. Is the firm charging the optimal price for the

product? Demonstrate how you lcnow. b. Shoutd the price be changed? Ifso, how?

is given by Qn = 6 * P. Assume the marginal a. Find the profit-maximizing price and quantity in

e4ch market. b. In which market is demand more elastic?

CoSt slice is constant at $1.00 and revenue tunctionis6 - 2Q. a. What is and quan-

'a single price?

What profit per c be eamed? tr. Suppose that Sam's

and charge a fixed to sell pizzaatcost

for this option. What quarrtity will a custo at the market price? What is the price Sam's

5. Suppose that demand for product is givenby Qn: I - 5P. Marginal isMR: 2A0 - 8.48, marginal cost is at $20.

costs.

is considering a quantity discourt. The units can be purchased at a Price of

and further units can be purchased at a profit with this method than if the bundled package option were not offered.of $80. How many units will the conflrmer

wee dem

price-discrimi-b. Show that

Os:900- MRs: 454 -

Qw: 700 - MRw: 700 -

ZPE

Qe Pw

2Qw

The first $12c

a.

1. Given each of the whether

h of the following

le company offers two basic

table shows

willing to pay for each

for $50 or thd combined bundted $70, who wil/buy each package?

the company will make a higher

Economics fot Managers, Third Edition, by Paul G. Famham. Published by Prentice Hall. Copyright @ 2014 by Pearson Education, lnc'

are three fans, and

types of users;

a. If the cabie offers any one