Chapter 515. Your boss, who is the general manager of the Pontiac Rangers, an adequate AA baseball team, has heard that you are taking a principles of economics course, and has asked you to research the demand for summer night games. She has surveyed a sample of 10 people whom she feels accurately represent the potential market. We will assume that they do as well. The results of the survey are presented below:
Number of Night Games Willing to Attend at Various Prices
Name $5.00 $4.50 $4.00 $3.50 $3.00 $2.50 $2.00
Arvilla XXXXXXXXXX
Quintha XXXXXXXXXX
Mary XXXXXXXXXX
Ray XXXXXXXXXX
Vern XXXXXXXXXX
Fran XXXXXXXXXX
Jerry XXXXXXXXXX
Richard XXXXXXXXXX
Whitey XXXXXXXXXX
Windy XXXXXXXXXX
a. What ticket price will maximize total revenue for the team?
b. Using the midpoint formula, what is the price elasticity of demand between
$2.50 and $2.00?
c. The local bowling alley has extended league play on Wednesday night. Is the
cross elasticity of demand positive or negative between night baseball and bowling? If the manager scchedules night games on Wednesday will that affect attendance at the game
17. Consider chip plants: potato and computer. Assume there is a large rise in the demand for computer chips and potato chips.
a. How responsive to demand is each in the market period?
b. Describe what a manufacturer of each product might do in the short run to
increase production.
c. How does the long run differ for these products?
Chapter 711. What is the difference between average total cost and average variable cost?
Chapter 811. Michelle Slatalla (New York Times, February 3, 2005) stated, “The conven- tional wisdom a few years back was that the Internet would erase price differ- ences among retailers by giving customers instant access to the best deals. Mer- chants who charged more would be driven out of business.” She further quoted Professor Michael Baye, who noted, “The prediction was price-comparison sites would create perfectly competitive environments in which all firms would have to charge the same price.” These forecasts for the Internet creating “perfectly competitive” markets were based on the competitive model we have presented in this chapter. Do you think the Internet has helped create more competitivemarkets or less? Why
14. Assume a competitive industry is in long-run equilibrium and firms in the indus- try are earning normal profits. Now assume that production technology improves such that average total costs decline by $5 a unit. Describe the process this industry will go through as it moves to a new long-run equilibrium.