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EJH Cinemas, a movie theater next to your university, attracts two types of customers-those who are associated with the university (students, faculty, and staff) and locals who live in the surrounding area
EJH Cinemas, a movie theater next to your university, attracts two types of customers-those who are associated with the university (students, faculty, and staff) and locals who live in the surrounding area. There are 5,000 university customers interested in purchasing movie tickets from EJH Cinemas, with a maximum willingness to pay of $8 per ticket. There are 10,000 local customers interested in purchasing tickets, with a maximum willingness to pay of $10 per ticket. The movie theater incurs a constant marginal cost = average total cost of $5 per ticket. For simplicity, assume each customer purchases, at most, one ticket. What is the amount of consumer surplus if the price is $8 per ticket? $5,000 $0 $20,000 $30,000 $10,000
D Question 51 2.5 pts Profit per additional unit is the difference between marginal revenue and marginal cost. True False « Previous Next →
Question 48 2.5 pts Monopolistically competitive firms that are earning zero economic profit at q* would most likely leave the industry in the long run. True False
Expert Solution
58) Consumer surplus occurs when price of the product is less than the maximum willingness to pay for the product.
5,000 consumers have maximum willingness to pay of $8 which means they will have 0 consumer surplus when the price is $8.
10,000 consumers have maximum willingness to pay of $10 which means they will have 0 consumer surplus because they will not even buy the product.
Option B is correct.
51) Marginal profit / Profit per unit = Marginal revenue - Marginal cost
Thus, this statement is true.
48) If monopolistically competitive industry earn zero profit in short run, its average variable cost must be less than its average total cost while in long run, there is no fixed cost which makes average total cost = average variable cost which induce them to leave the market.
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