1. The supply and demand schedules for tickets to basketball games in town of Oakwood are given in the table below.
Price Quantity Demanded Quantity Supplied
$6 5,000 2,000
7 4,000 2,000
8 3,000 2,000
9 2,000 2,000
10 1,000 2,000
The stadium owners need to find the optimum price for the games.
1. What are the coefficients of elasticity of supply and demand if the price is raised from $6 to $8? (8 points)
2. Characterize the demand and supply for tickets based on the calculated elasticies. (4 points)
3. What is the optimum price that the stadium owners can set for the tickets? (4 points)
4. Why is the selected price for the tickets better than other prices given in the table above? (4 points)
2. A software producer has fixed costs of $120,000 per month and her Total Variable Costs (TVC) as a function of output Q are given below. Complete the table (TC, MC, TR, and MR), then answer Parts A and B.
Q TVC Price
1,000 115,000 125
2,000 120,000 74
3,000 130,000 55
4,000 150,000 44
5,000 180,000 30
(a.) (15 points) If software can only be produced in the quantities above, what should be the production level if the producer operates in a monopolistic competitive market where the price of software at each possible quantity is also listed above? Why? (Show all work.)
(b.) (15 points) what should be the production level if fixed costs rose to $160,000 per month? Explain