Question

Monopoly - End of Chapter Problem 3. Bob, Bill, Ben, and Brad Baxter have just made a documentary movie about their basketball team. They are thinking about making the movie available for download on the internet, and they can act as a single-price monopolist if they choose. Each time the movie is downloaded, their internet service provider charges them a fee of $4. The Baxter brothers are arguing about which price to charge customers per download. The accompanying table shows the demand schedule for their film. a. Calculate the total revenue for P = $6, $4, and $2. Price of Quantity of downloads download demanded $10 0 8 1 6 3 4 6 2 10 0 15 Total revenue, P = $6: $ Total revenue, P = $4:$ Total revenue, P = $2:$ Calculate the marginal revenue per download when price changes from $6 to $4 and when price changes from $4 to $2.

Answer 1

(Part a)

(i) TR = P x Q

When P = $6, Q = 3 and TR ($) = 6 x 3 = 18

When P = $4, Q = 6 and TR ($) = 4 x 6 = 24

When P = $2, Q = 10 and TR ($) = 2 x 10 = 20

(ii) MR = Change in TR / Change in Q

When Price changes from $6 to $4, MR = (24 - 18) / (6 - 3) = 6/3 = $2

When Price changes from $4 to $2, MR = (20 - 24) / (10 - 6) = 4/4 = $1

NOTE: As HOMEWORKLIB's Policy, only 1st part with multiple sub-parts is answered. You need to post other parts separately.