Jenkins Hot Air Balloon Rides is a monopoly. The first 2 columns above show the

Question

Jenkins Hot Air Balloon Rides is a monopoly. The first 2 columns above show the demand schedule for Jenkin's; and the third column shows its total cost schedule.

1. The fixed cost of 4 rides is __________.

2. The total revenues from selling 3 units is ____________.

3. The marginal revenues from selling the 2nd unit is ______________.

4. The marginal ost from selling the 5th unit is ______________.

5. The average total costs of selling 4 units is _____________.

6. Calculate the following:

      a. the profit maximizing level of output (number of rides):______________

      b. the profit maximizing price:______________

      c. the profit maximizing economic profit:_______________

PRICE (Thousands of dollars per ride) QUANTITY (Rides per month) TOTAL COST (thousands of dollars per month) 220 0 80 200 1 160 180 2 260 160 3 370 140 4 520 120 5 680

Explanation / Answer

1. The fixed cost of 4 rides is 80.

2. The total revenues from selling 3 units is 480. (i.e. 160*3)

3. The marginal revenues from selling the 2nd unit is 160. (i.e. (180*2) - (200*1))

4. The marginal ost from selling the 5th unit is 160. (i.e. 680 - 520)

5. The average total costs of selling 4 units is 130.(i.e. 520/4)

6. Calculate the following:

      a. the profit maximizing level of output (number of rides):3

      b. the profit maximizing price: 160

      c. the profit maximizing economic profit:110

PRICE (Thousands of dollars per ride) QUANTITY (Rides per month) TR MR TOTAL COST (thousands of dollars per month) MC Profit(TR - TC) 220 0 0 - 80 - -80 200 1 200 200 160 80 40 180 2 360 160 260 100 100 160 3 480 120 370 110 110 140 4 560 80 520 150 40 120 5 600 40 680 160 -80

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