Question

The Gulf Sea Turtle Conservation Group (GSTCG), a non–profit group of volunteers working to collect data on nesting sea turtles and to promote sea turtle conservation, is considering creating a video to educate people about sea turtle conservation. The cost of duplicating a video on a DVD and mailing the DVD is $5.56. In a GSTCG member meeting, the video plan was discussed.

The first two columns of Table 1 below shows the expected demand for the DVD at different suggested donation levels, and they can act as a single-price monopolist if they choose to. The receipts will be used to fund GSTCG supplies for their data collection and conservation work. At the end of each sea turtle nesting season, any excess funds

are donated by the GSTCG to a local non-profit sea turtle research and rehabilitation facility.

a. Complete Table 1 by computing the Total Revenue, Marginal Revenue, Total Cost, and Profit columns, each rounded to two decimal places. The cost of duplicating a video on a DVD and mailing the DVD, the Marginal Cost, is $5.56. (1 point)

Table 1

Suggested Donation per DVD Request	Anticipated Number of DVD Requests	Total Revenue	Marginal Revenue	Total Cost	Profit
$19.00	0	$0	$0	$0	$0
$15.00	2	$30	$15	$11.12	$18.88
$9.50	5	$38	$4.00	$22.24	$15.76
$7.75	9	$77.50	$6.58	$55.60	$21.90
$3.00	15	$45	$-6.50	$83.40	$-38.40
$0.00	24	$0	$-9	$111.20	$-111.20

b. The President wants the GSTCG to provide videos to generate the most possible donations (Total Revenue). What price is the President of the GSTCG favoring and how many people will receive the DVD if this becomes the price of the suggested donation? Explain your answers. (1 point)

c. The Education Outreach Committee wants the GSTCG to provide videos to the most possible number of people. What price is the Educational Outreach Committee favoring and how many people will receive the DVD if this becomes the price of the suggested donation? Explain your answers. (1 point)

d. The Treasurer of the GSTCG wants the DVD program to be as efficient as possible so that the marginal revenue equals marginal cost. What price is the Treasurer favoring and how many people will receive the DVD if this becomes the price of the suggested donation? Explain your answers. (1 point)

e. The Fundraising Committee wants the DVD program to generate as much profit in donations as possible. What price is the Fundraising Committee favoring and how many people will receive the DVD if this becomes the price of the suggested donation? Explain your answers. (1 point)

Answer 1

A.

B. Total revenue = price * quantity. At low level of quantity, revenue will be less. But at higher levels of quantity, prices are very low again bringing total revenue down. Hence, quantity maximizing total revenue has to be somewhere in between.

The most possible donations (Total Revenue) are possible when price is $7.75. At this price, 9 people receive the DVD and a revenue of  $69.75 is generated.

C.)The basic law of demand states that as price rises, quantity demanded falls. Therefore people would demand highest number of DVD when price is $0.

If The Education Outreach Committee wants the GSTCG to provide videos to the most possible number of people, then price should $0. At this price, 24 people receive the DVD.

D.The profit maximizing choice of monopolist is where MR =MC. If the monopolist decides to produce a lower quantity, then it would indicate that MR > MC at those quantities. When this happens, the monopolist can increase profits by increasing the quantity.

On the other hand, if firm produces higher quantities, then MC>MR and in this case, firm should reduce the quantity of output to increase profits.

If the Treasurer of the GSTCG wants the DVD program to be as efficient as possible so that the marginal revenue equals marginal cost, then the price that equates marginal cost and marginal revenue is $7.75. At this price, 9 people receive the DVD.

E.

The Fundraising Committee wants the DVD program to generate as much profit in donations as possible, then it should behave like a monopoly and equate marginal cost with marginal revenues. The price that equates marginal cost and marginal revenue is $7.75. At this price, 9 people receive the DVD.