Question
In: Economics
Problem 2. Suppose there is only one yoga studio in town. The marginal cost of producing...
Problem 2. Suppose there is only one yoga studio in town. The marginal cost of producing yoga sessions is as follows: MC=12. The yoga studio faces the following market demand function: Q=20-(1/2)P, and marginal revenue MR=40-4Q.
- (6 points) Calculate the profit-maximizing price, output, and profit for the yoga studio.
- (bonus: 3 points) Graph the market demand curve, the studio's marginal revenue and marginal cost curves, indicating profit, price, and quantity at the profit-maximizing level of output.
- (4 points) Suppose that the owner of the studio has determined that each of her 30 regulars has the following identical demand for yoga sessions: Q=4-(1/4)P. The studio's marginal revenue from one of these consumers, then, is MR=16-8Q. The owner wants to use a two-part pricing scheme based on this information, in which she charges admission to the studio and a per-session price. The studio's costs have not changed in this scenario. How should the owner set the admission fee and the per-session price? How many sessions will she sell, and what will her profit be?
Solutions
Rahul Sunny answered 2 years agoRelated Solutions
Pablo owns a yoga studio that has a cost of capital of 6.19 percent. The yoga...
Pablo owns a yoga studio that has a cost of capital of 6.19
percent. The yoga studio is expected to produce annual cash flows
of 59,900 dollars for 5 years. The first annual cash flow of 59,900
dollars is expected later today. In addition to the annual cash
flows of 59,900 dollars, the yoga studio is also expected to
produce a special, one-time cash flow of 67,267 dollars in 2 years
from today. How much is Pablo’s yoga studio worth?
M. Anthony, LLP, produces music in a studio in London. The cost of producing one typical...
M. Anthony, LLP, produces music in a studio in London. The cost
of producing one typical song follows. Average Cost per Song:
Labor, including musicians and technicians $ 17,200 Variable
overhead, including clerical support 3,200 Fixed overhead 21,200
Marketing and administrative costs (all fixed) 28,080 Total cost
per song $ 69,680 The fixed costs allocated to each song are based
on the assumption that the studio produces 60 songs per month.
Required: Treat each question independently. Unless stated
otherwise, M....
M. Anthony, LLP, produces music in a studio in London. The cost of producing one typical...
M. Anthony, LLP, produces music in a studio in London. The cost
of producing one typical song follows. Average Cost per Song:
Labor, including musicians and technicians $ 17,200 Variable
overhead, including clerical support 3,200 Fixed overhead 21,200
Marketing and administrative costs (all fixed) 28,080 Total cost
per song $ 69,680 The fixed costs allocated to each song are based
on the assumption that the studio produces 60 songs per month.
Required: Treat each question independently. Unless stated
otherwise, M....
A seller produces output with a constant marginal cost MC = 2. Suppose there is one...
A seller produces output with a constant marginal cost MC = 2.
Suppose there is one group of consumers with the demand curve P1 =
16 - Q1, and another with the demand curve P2 = 10 - (1/2)Q2.
a) If the seller can discriminate between the two markets, what
prices would she charge to each group of consumers?
b) If the seller cannot discriminate, but instead must charge
the same price P1 = P2 = P to each consumer...
A company sells only one item with a marginal cost of $3 and there is a...
A company sells only one item with a marginal cost of $3 and
there is a 50% probability of getting a high value customer who is
willing to pay $8 and a 50% probability of getting a low value
customer who is willing to pay $5. What is the expected profit?
What about the expected profit if it was an auction? What about if
it was an auction with three potential customers? What would be the
important things to know...
Suppose that a competitive firm's marginal cost of producing output q is given by MC(q) =...
Suppose that a competitive firm's marginal cost of producing
output q is given by MC(q) = 3+2q. Assume that the market price of
the firm's product is $9.
(a) What level of output will the firm produce?
(b) Suppose that the average variable cost of this firm is given
by AV C(q) = 3 + q. Suppose that the firm's fixed costs are known
to be $3. Will the firm be earning a positive, negative, or zero
profit in the...
Suppose there are only two oil producing countries in the world and who compete with one...
Suppose there are only two oil producing countries in the
world and who compete
with one another: Canada and Norway. The world inverse demand
for oil is given by P(Q) =
180 ? qC ? qN where qC and qN are the quantities of oil
brought to market by Canada and Norway,
respectively. The cost function for extracting oil is
identical across both countries and equal to
C(q) = 60q. The two countries engage in Cournot competition by
choosing how...
Red Royal Banking is evaluating the yoga studio project, a 2-year project that would involve buying...
Red Royal Banking is evaluating the yoga studio project, a
2-year project that would involve buying equipment for 76,000
dollars that would be depreciated to zero over 2 years using
straight-line depreciation. Cash flows from capital spending would
be $0 in year 1 and 19,000 dollars in year 2. Relevant annual
revenues are expected to be 84,000 dollars in year 1 and 84,000
dollars in year 2. Relevant expected annual variable costs from the
project are expected to be 16,000...
1.If the firm is producing at a quantity of output where marginal cost exceeds marginal revenue,...
1.If the firm is producing at a quantity of output where
marginal cost exceeds marginal revenue, then ________. (there can
be multiple answers.)
A)the firm should reduce production
B)each marginal unit adds profit by bringing in more revenue
than its cost
C)the firm's perceived demand will shift to the left
D)the excess profit would attract additional competition
2.In what way(s) is a monopolistically competitive firm
inefficient?(there can be multiple answers.)
A) It does not produce at the minimum of its...
Suppose a firm is producing a level of output such that marginal revenue is equal to...
Suppose a firm is producing a level of output such that marginal
revenue is equal to marginal cost. The firm is selling its output
at a price of $6 per unit and is incurring average variable costs
of $7 per unit and average total costs of $8 per unit. Given this
information, it may be concluded that the firm:
Group of answer choices
is operating at maximum total profit
is operating at a loss that could be reduced by shutting...
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- A pension fund manager is considering three mutual funds. The first is a stock fund, the...
- Compute the cost of not taking the following cash discounts. (Use a 360-day year. Do not...
- During his project presentation, Bob falls sick and performs poorly. However, his colleague, Dan, concludes that...
- A sample human input file that contains test values that a human would enter on the...
- A solution is prepared by dissolving 15 ml of methanol in 150.0 ml water at 25...
- Consider a newlywed who is planning a wedding anniversary gift of a trip to Canada for...
- We are evaluating a project that costs $868,000, has a life of eight years, and has...
ADVERTISEMENT