Question

In: Economics

Ad Slots Suppose that the broadcaster knows the demand for ad slots (Q) of a sports...

Ad Slots

Suppose that the broadcaster knows the demand for ad slots (Q) of a sports program is: P = 1030 − 5Q, the marginal cost is given by: MC = 30, and total cost is given by: T C = 30Q.

a) Find the profit-maximizing quantity.

b) Find the profit-maximizing price.

c) Suppose that the league can sell these rights at auction to many broadcasters. Up to how much will the broadcasters bid at the auction?

Expert Solution

Revenue = p*q

revenue= (1030-5q)*q

revenue = 1030q-5q²

marginal revenue =

marginal rvenue= 1030-10q

profit maximisation means

MR = MC

1030-10q=30

10q=1000

q=100

b) putting q in equation we get

p= 1030 - 5*100

p=1030 - 500

p=530

c) broadcasters will bid at the price upto maximised profit

so

total revenue = 530 *100 = 53000

total cost = 30*q = 30 *100 = 3000

so profit max = 53000-3000 = 50000

so they will bid at maximum 50000

Rahul Sunny answered 1 year ago

Suppose that demand for a product is Q = 1200 − 4P and supply is Q...

Suppose that demand for a product is Q = 1200 − 4P and supply is Q = −240 + 2P. Furthermore, suppose that the marginal external damage of this product is $12 per unit. a. Graph the supply and demand curves. Show the marginal external damage on your graph. b. How many more units of this product will the free market produce than is socially optimal? c. What is the socially optimal price of the product? c. Calculate the deadweight...

Suppose the demand for donuts in Bethlehem is; P = 10 – Q where Q =...

Suppose the demand for donuts in Bethlehem is; P = 10 – Q where Q = qA + qB There are only two firms that sell donuts in Bethlehem, Firm A and Firm B. Each firm has the same cost function; TC = 2 + q a. Determine the Cournot equilibrium. b. Explain why the intersection of the best-response functions is the Cournot equilibrium.

Suppose, if ill, that Fred’s demand for health services is summarized by the demand curve Q...

Suppose, if ill, that Fred’s demand for health services is summarized by the demand curve Q = 50 − 2P , where P is the price of services. How many services does he buy at a price of $20? Suppose that Fred’s probability of illness is 0.25. What is the actuarially fair price of health insurance for Fred with a zero coinsurance rate? If the insurance company pays Fred’s entire loss, will the insurance company offer him insurance at the...

Suppose the market demand for broccoli is given by Demand: Q = 1000 – 5P Where...

Suppose the market demand for broccoli is given by Demand: Q = 1000 – 5P Where Q is quantity measured in 100s of bushels and P is price per hundred bushels. The market supply is given by Supply: Q = 4P – 80 What is the equilibrium price and quantity? How much is spent on broccoli? What is consumer and producer surplus? Describe the impact of a $150 per hundred bushel price floor on broccoli. (How many bushels would be...

Suppose that the demand curve for wheat is Q= 120-10p and the supply curve is Q=10p...

Suppose that the demand curve for wheat is Q= 120-10p and the supply curve is Q=10p The government imposes a price ceiling p =$ 3 per unit. a. How do the equilibrium price and quantity change? (round quantities to the nearest integer and round prices to the nearest penny) The equilibrium quantity without the price ceiling is 60 and the price without the price ceiling is $6. The equilibrium quantity with the price ceiling is 30. b. What effect does...

Suppose that consumer (retail) demand for a product is given by: Q=100−P, where Q is the...

Suppose that consumer (retail) demand for a product is given by: Q=100−P, where Q is the quantity demanded and P is the price. The inverse demand curve (which gives the price as a function of the quantity demanded) is: P=100−Q. The marginal cost of production and average total cost of production are $26 per unit, and the marginal cost of distribution and average total cost of distribution are $10 per unit. Suppose the retail distribution is monopolized by another firm....

1. Suppose that the market demand is described by P = A – B(Q+q) where P...

1. Suppose that the market demand is described by P = A – B(Q+q) where P is the market price, Q is the output of the incumbent firm, and q is the output of the potential entrant to the market. The incumbent’s total cost function is C(Q) = c1Q, whereas the cost function of the entrant is C(q) = c2q+F. a. If the entrant firm observes the incumbent producing Q* units of output and expects this output level to be...

Suppose that the cost of producing q appliances is c(q)=200-q+0.96q^2 and the demand function is given...

Suppose that the cost of producing q appliances is c(q)=200-q+0.96q^2 and the demand function is given by q=400-25p. Develop the total revenue, total cost (if not given), and profit functions. Explain these functions in few sentences. Compute the point elasticity of demand. Find the intervals where the demand is inelastic, elastic, and the price for which the demand is unit elastic. Find the quantity that maximizes the total revenue and the corresponding price. Interpret your result. Find the quantity that...

Suppose that the demand for a special kind of silica is given by Q = 55...

Suppose that the demand for a special kind of silica is given by Q = 55 – 0.5P, where Q is in tons of silica per day and P is the price per ton. This special kind of silica is produced by Thorpe Industries (a monopolist) that has a constant marginal and average total cost of $10 per ton. Derive the inverse demand and marginal revenue curves faced by Thorpe Industries. Equate marginal cost and marginal revenue to determine the...

Suppose that the weekly demand for a good in a competitive market is Q = -40.1592P...

Suppose that the weekly demand for a good in a competitive market is Q = -40.1592P + 401592. Further suppose that the typical long-run weekly cost curve for a company in the market is: C(q) = .75q^3- 54q^2 + 4500q + 4000 a) What is the long-run equilibrium price of the good (to two decimal places) b) How many companies will operate in the market (to two decimal places)?