Problem 30 Points 21 You Are The Manager For A Popular Local Musical Act The Clearwater Hot Club You Pay Chc A Flat 1 (46.29 KiB) Viewed 36 times
Problem 30 Points 21 You Are The Manager For A Popular Local Musical Act The Clearwater Hot Club You Pay Chc A Flat 2 (18.63 KiB) Viewed 36 times
Problem 30 Points 21 You Are The Manager For A Popular Local Musical Act The Clearwater Hot Club You Pay Chc A Flat 3 (18.63 KiB) Viewed 36 times
Problem: 30 points: 21. You are the manager for a popular local musical act, the Clearwater Hot Club. You pay CHC a flat fee of $300 to go to as many gigs as you tell them to (they make $300 per week whether they play 8 shows that week, none, or any number in between). Your marginal cost per gig is a constant $50 per gig. You have a variety of prices you can charge venues, and you have information on how many gigs you can book at each price charged. P is price, in dollars, and Q is quantity demanded. Calculate total revenue, marginal revenue, fixed cost, marginal cost, variable cost, total cost, and profit for each quantity listed. Profit Price Q(gigs) TR MR FC MC VC TC 400 0 350 1 300 2 250 3 200 4 5 6 7 8 150 100 50 0 What price and quantity should you choose? What profit will you make? Show this problem graphically by graphing the Demand curve, MR, and MC, labeling everything relevant, including the equilibrium price and quantity. Also show consumer and producer surplus, and the deadweight loss of monopoly. If you wanted to maximize total surplus instead of profits, how many gigs would you produce? (Problem continued on next page).
What is the most money Clearwater Hot Club could ask for per gig? (Hint: how do fixed costs affect a firm's decisions on price and quantity? What is the minimum amount of economic profit a firm needs to still make the product? Therefore, how much could the band make while still allowing you to stay in business?)
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