Question
need help to solve this question Jimmy has a room that overlooks, from some distance, a major league baseball stadium. He decides to rent a
need help to solve this question
Jimmy has a room that overlooks, from some distance, a major league baseball stadium. He decides to rent a telescope for $50.00 a week and charge his friends and classmates to use it to peep at the game for 30 seconds. He can act as a single-price monopolist for renting out "peeps." For each person who takes a 30-second peep, it costs Jimmy $0.10 (marginal cost) to clean the eyepiece. The accompanying table shows the information Jimmy has gathered about the demand for the service.
Price of Peep
$
Quantity of peeps demanded
Total Revenue
Marginal Revenue
1.20
0
1.00
100
0.90
150
0.80
200
0.70
250
0.60
300
0.50
350
0.40
400
0.30
450
0.20
500
0.10
550
For each price in the table, calculate the total revenue from selling peeps and the marginal revenue per peep.
b) At what quantity will Jimmy's profit be maximized? What price will he charge? Explain.
c) What is Jimmy's total profit at the profit maximizing output?
d) Sketch Jimmy's demand curve, marginal revenue and marginal cost curves and shade the area representing his profit. (no need to draw to scale, show important information only)
e) Jimmy's landlady complains about all the visitors coming into the building and tells Jimmy to stop selling peeps. Jimmy discovers, however, that if he gives the landlady $0.20 for every peep he sells, she will stop complaining. What effect does the $0.20-per-peep bribe have on Jimmy's marginal cost per peep? What is the new profit-maximizing quantity of peeps? What effect does the $0.20-per-peep bribe have on Jimmy's total profit?
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