Sunday, December 09, 2012

Monday's Lecture

Suppose a family of five wants to go a movie at the only theater in town.  There is not a competing firm for hundreds of miles.  If the firm were a pure monopoly, answer the following questions:

1.  What price would the firm charge?
2.  How many seats would the theater sell?
3.  How much is total revenue?
4.  How much is total cost?
5.  How much is profit?
6.  How much is consumer's surplus?
7.  How much is the dead weight loss?

Now assume that the theater can price discriminate.

1.  What quantity does the firm sell?
2.  What is the total cost?
3.  How much is total revenue?
4.  How much profit does the firm earn?
5.  If the firm were perfectly competitive, what quantity would the firm sell?

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