Question

Suppose seven individuals enjoy going to the comedy club. Their demand is as follows.

Person	Willingness to pay
Allison	60
Beatrice	54
Cally	48
David	42
Ezekiel	36
Francesca	30
Gertrude	24

If the comedy club had a monopoly and a marginal cost of $7 per entrant, the comedy club would sell_____ tickets if it could charge only one price.

Answer 1

Let us construct the demand curve and Marginal curve for each price level -

TR = P*Q

and MR is the change in TR when output changes by 1 unit while MC is constant at 7.

P	Q	TR	MR	MC
60	1	60		7
54	2	108	48	7
48	3	144	36	7
42	4	168	24	7
36	5	180	12	7
30	6	180	0	7
24	7	168	-12	7

The profit maximizing output is the one where MR = MC-

The MR = MC is at point E but we must round it off backwards where MR is closest to MC and it is also the case that MR is not less than MC.

The comedy club will sell 5 tickets if it could only one price.