Thomas More College ECO 615 Problem Set Clutter
Problem Set 1 ECON Danyelle Clutter 3/12/17
1) In the Wolverton/Manteca example, at what prices are tickets sold to each group? Why do you think the
 prices are different?
 The cost explanation could likely be based upon supply and demand of the given ticket. There are only 10,000
 Wolverton tickets and if demand for those tickets is higher than the quantity of 10,000, then prices are relatively
 higher than the tickets available for the Manteca supporters.
 2) Suppose a firm sells its output for P=20-1000 Q
Where Q is the quantity it produces and sells. Total costs is given by TC=5000+4Q
What is the profit maximizing value for production? At what price is this product sold for? Use the MR=MC
 approach at the end of the question.
  In the above figure, you see the marginal revenue and marginal cost functions for a firm with a single output.
 Assume that both total revenue and total cost equal zero when Q = 0. Where do you think the profit
 maximizing level of production for the firm will be? Explain with the help of a diagram.
 3) I claimed in class that the problem in our luxury box example was that price was lowered too much in
 order to obtain 1 extra seat sale
 a. Compute the percentage change in price and the percentage change in quantity demanded when price
 falls from $1,000,000 to $950,000 and the boxes increase from 25 to 26.
 b. What is the Elasticity of Demand for luxury boxes?
 c. At what new lower price will total revenue be unchanged?
 d. At what new lower price will profit be unchanged?
 4) The sign of marginal revenue and Elasticity. We learned that MR=P[1+ 1ε ]
 Suppose P > O, what is the relationship between marginal revenue and 0 given below? Ɛ