Questions for Discussion 1. What does the demand for enrollments in your college look like? What is on the axes? How do tuition, enrollment, and total revenue interact? LOS-1 2. If the marginal utility of pizza never diminished, how many pizzas would you eat? LOS-1 3. How do total and marginal utility change as you spend more time tweeting your friends? LOS-I 4. Can you think of any product that violates the law of diminishing marginal utility? LOS-I 5. How did Apple decide what price to charge for its 10-year anniversary iPhone in 2017? Could it have charged a higher price? Should it have? LOS-I 6. When the producer price discriminates in Figure 5.4, what happens to unit sales? Total revenue? Total profit? LOS-3 7. Under what circumstances could a producer extract the entire consumer surplus in Figure 5.5? LOS-2 8. How does a car dealer determine where a buyer is on the market demand curve? LOS-3 9. Why do airlines charge different fares for the same flight? LOS-3 10. Why does anyone care what cosmetics Kylie Jenner uses? LOS-4 PROBLEMS FOR CHAPTER 5 LOS-1 1. According to Table 5.1 With which box of popcorn does marginal utility first diminish? (b) With which box does marginal utility become negative? LOS-2 2. In Figure 5.4, how much consumer surplus is received by (a) Fred? (b) Hua? (c) Carlos? LOS-2 3. In Figure 5.4, if Bob's maximum price increased by 50 percent, (a) Would he buy a Spyder? (b) How much consumer surplus would he have? LOS-2 4. If the price of a Spyder drops to $700,000 in Figure 5.4, (a) How many Spyders can be sold at that price? (b) How much consumer surplus will there be if all the cars are sold at that price? (c) How much revenue will the car dealer get if he sells all the cars at (1) the same price ($700,000)? (ii) the maximum price each buyer is willing to pay? LOS-3 5. The following data reveal how much each consumer is willing to pay for an Alaskan cruise: Amy $ 900 Ed $2,000 Bob $1,100 GIQI $1,300 Carol $1,500 HUQO $1,800 Eduardo $ 400 Isabelle $1,500 (a) Draw the market demand for these eight consumers. (b) If the cruise costs $1,000, how many passengers will there be? (c) If the cruise costs $1,000, how much total revenue will be collected? (d) f the cruise costs $1,000, how much consumer surplus will those passengers enjoy? LOS-4 6. Suppose movie downloads cost $2 apiece and game downloads cost $3. If the marginal utility of movie downloads at the optimal mix of consumption is 10 utils, what is the marginal utility of a game download? LOS-I ODO TOHEJ 8. XY 7. Suppose the graph below depicts the demand for football tickets at Grand University. (a) If current demand is represented as Demand 2, what is total revenue at the price of $24? (b) If the price drops to $12, how many tickets would consumers purchase? (c) What is total revenue at that point? (d) f the team has a losing streak and the price is still $24, at what point do we end up? (e) What is total revenue at that point? $36 32 28 24 20 4 D 0 1.000 2,000 3,000 4.000 5,000 6,000 7.000 8,000 9,000 10000 11000 12.000 TICKETS (per gamo) 16 12 8 d D LOS-4 8. Suppose the following table reflects the total satisfaction derived from consumption of pizza slices and Pepsis. Assume that pizza costs $1 per slice and a large Pepsi costs $2. With $20 to spend, what consumption mix will maximize satisfaction? page 114 Quantity consumed 2 3 7 8 9 10 11 12 13 14 Total unHs of pleasur 47 92 132 166 196 224 251 271 28a 303 313 315 312 300 from pizza slices Total units of pleasure from Pepsis 111 200 272 336 386 426 452 456 444 408 340 217 92 -17 LOS-4 9. A consumer downloads 4 movies and 3 apps per week. Suppose the price is $5 per movie and $3 per app, and the marginal utility for this consumption level is 12 for a movie and 10 for an app. (a) Calculate marginal utility per dollar. (b) Is this optimal consumption? (c) If not, how should the consumer change his consumption to maximize? LOS-1 10. Decisions for Tomorrow: Use the following data to illustrate the relevant demand curve: Price $10 9 8 7 6 5 4 3 2 Quantity 2 4 6 8 10 12 14 16 18 20 (a) If the price increases from $4 to $8, by how much does the quantity demanded decline? (b) IT a successful advertising campaign increases the quantity demanded at every price by 4 units, page 115 (i) Draw the new demand curve D. (ii) How many units are now purchased at $8? onnind cutre, 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 QUANTITY (U15 per penod) MEN NO $10 9 8 7 6 54 5 NW 2 0 2 3 4 5