Mega Homework

This homework is due at the beginning of class on Wednesday, May 6th. No late homework will be
accepted. You may work in groups to discuss but each student should turn in your own homework. This
homework is worth a total of 60 points.
Chapter 8 Problems
1) The table below lists the short-run costs for One Guy's Pizza. First, fill up this table below. Then
answer the following questions:
If One Guy's can sell all the output they produce for $12 per unit, how much should One Guy's produce to
maximize profits? Does One Guy's Pizza earn an economic profit in the short-run? (8 points)
Q
TFC
TVC
ATC
AVC
MC
Profits
58
100
336.4
59
100
348.1
60
61

100
100

360
372.1

2) Assume the market for tortillas is perfectly competitive. The market supply and demand curves for
tortillas are given as follows:
supply curve:
P = .000002Q demand curve: P = 11 - .00002Q
The short run marginal cost curve for a typical tortilla factory is:
MC = .1 + .0009Q
a. Determine the equilibrium price for tortillas. (1 point)
b. Determine the profit maximizing short run equilibrium level of output for a tortilla factory. (3 points)
c. At the level of output determined above, is the factory making a profit, breaking-even, or making a
loss? Explain your answer. (3 points)
d. Assuming that all of the tortilla factories are identical, how many tortilla factories are producing
tortillas? (2 points)
Chapter 9 Problems
1) Questions for Review (textbook page 352): 1 (2 points), 3 (2 points), 4 (2 points)
2) The demand and supply functions for basic cable TV in the local market are given as:
QD= 200,000 - 4,000P and QS = 20,000 + 2,000P. Calculate the consumer and producer surplus in this
market. If the government implements a price ceiling of $15 on the price of basic cable service, calculate
the new levels of consumer and producer surplus. Are all consumers better off? Are producers better
off? (7 points)
Chapter 10 Problems
1) Exercises (textbook page 396): 6 (6 points), 7 (6 points), 11 (6 points)
2) If the regulatory agency sets a price where AR = AC for a natural monopoly, output will be (3 points)
A) equal to the competitive level.
B) equal to the monopoly profit maximizing level.
C) greater than the monopoly profit maximizing level and less than the competitive level.
D) greater than the competitive level.

3) If a monopolist sets her output such that marginal revenue, marginal cost and average total cost are
equal, economic profit must be: (3 points)
A) negative.
B) positive.
C) zero.
D) indeterminate from the given information.
Chapter 11 Problems
1) A tennis pro charges $15 per hour for tennis lessons for children and $30 per hour for tennis lessons for
adults. The tennis pro is practicing (3 points)
A) first-degree price discrimination.
B) second-degree price discrimination.
C) third-degree price discrimination.
D) fourth-degree price discrimination.
E) fifth-degree price discrimination
2) Bindy, an 18-year-old high school graduate, and Luciana, a 40-year-old college graduate, just
purchased identical hot new sports cars. Acme Insurance charges a higher rate to insure Bindy than
Luciana. This practice is an example of: (3 points)
A) collusion.
B) price discrimination.
C) two-part tariff.
D) bundling.
E) none of the above