-Pinesboro Herald Is the Only Local Newspaper in the City

question 522

Essay

-Pinesboro Herald is the only local newspaper in the city of Pinesboro. The publisher faces the demand schedule shown in the first table above and has the cost schedule shown in the second table above.
a) Calculate the marginal revenue schedule. In a figure, draw the demand curve and the marginal revenue curve.
b) Calculate the publisher's marginal cost and average total cost schedules. In the same figure that you drew the demand and marginal revenue curves, draw the marginal and the average total cost curves.
c) What are the publisher's profit-maximizing output and price? What is the publisher's economic profit per day?
d) At the price charged, is the demand for newspapers elastic or inelastic? Explain your answer.
e) Does the publisher use resources efficiently? What is the deadweight loss? Explain your answer.
f) Will the publisher try to price discriminate? Why or why not?

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Definitions:

Fixed Costs

Costs that do not change with the level of output or production, such as rent, salaries, and loan payments.

Output Level

The total amount of goods or services produced by a business, sector, or economy within a specific timeframe.

Average Variable Cost

The total variable costs (like labor and materials) divided by the quantity of output produced, indicating the variable cost per unit.

Variable Cost

Costs that change in proportion to the activity of a business, such as materials and labor costs.