Student’s Last Name 1

Student’s Name

Professor’s Name

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Economics Homework Questions

Question 1

a) With price discrimination:

For students:

Ps = 10 – Qs/100

TRs=P*Qs=10Qs-Qs^2/100

MRs=10-Qs/50

MRs=MC

10-Qs/50=2

Qs= 400

Ps= $6

For adults:

Pa = 35 – Qa/100

TRa=P*Qa=35Qa-Qa^2/100

MRa=35-Qa/50

MRa=MC

35-Qa/50=2

Qa= 1650

Pa= $18.5

CS=1/2*400*(10-6) + 1/2*1650*(35-18.5) = $14412.5

AS=400*(6-2)+1650*(18.5-2)= $28825
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b) Without price discrimination:

Q=Qs+Qa=4500-200P

P = 22.5 – Q/200

TRs=P*Q=22.5Q-Q^2/200

MRs=22.5-Q/100

MRs=MC

22.5-Q/100=2

Q= 2050

P= $12.25

CS=1/2*2050*(22.5-12.25) = $10506.25

AS=2050*(12.25-2) = $21012.5

Question 2

a) With price discrimination:

For students:

Ps = 28 – Qs/50

TRs=P*Qs=28Qs-Qs^2/50

MRs=28-Qs/25

MRs=MC

28-Qs/25=4

Qs= 600

Ps= $16

For adults:

Pa = 40 – Q/50

TRa=P*Q=40Q-Q^2/50

MRa=40-Q/25
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MRa=MC

40-Qa/25=4

Qa= 900

Pa= $22

CS=1/2*600*(28-16) + 1/2*900*(36-22) = $900

AS=600*(16-4)+900*(22-4)= $23400

b) Without price discrimination:

Q=Qs+Qa=3400-100P

P = 34 – Q/100

TRs=P*Q=34Q-Q^2/100

MRs=34-Q/50

MRs=MC

34-Q/50=4

Q= 1500

P= $19

CS=1/2*1500*(34-19) = $11250

AS=1500*(19-4) = $22500

Question 3

a) With price discrimination:

For students:

Ps = 28 – Qs/50

TRs=P*Qs=28Qs-Qs^2/50

MRs=28-Qs/25

MRs=MC

28-Qs/25=3
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Qs= 625

Ps= $15.5

For adults:

Pa = 40 – Q/50

TRa=P*Q=40Q-Q^2/50

MRa=40-Q/25

MRa=MC

40-Qa/25=3

Qa= 925

Pa= $21.5

Profit=625*(15.5-3)+925*(21.5-3)= $24925

b) Without price discrimination:

Q=Qs+Qa=3400-100P

P = 34 – Q/100

TRs=P*Q=34Q-Q^2/100

MRs=34-Q/50

MRs=MC

34-Q/50=3

Q= 1550

P= $18.5

Profit=1550*(18.5-3)= $24025

Question 4

a) At P=$0.1:

Since marginal cost is equal to proce, Profitlow=Profithigh=0

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b) At P=$0.3:

Qh=70-50(0.3)=55

Ql=200-50(0.3)=185

MProfithigh=MProfitlow=0.3-0.1= $0.2

Profitlow=0.2*55= $11

Profithigh=0.2*185= $37

c) At Qh= 200

Ph=4-Qh/50=4-200/50=0

Ql=70-50(0)=70

Therefore, at least 70 customers are required for low demand