Microsoft Word - F15 PSet2.docx Microsoft Word - F15 PSet2.docx...

Microsoft Word - F15 PSet2.docx

Microsoft Word - F15 PSet2.docx

1. TheresidentsofthetownMarinaDelReyallloveeconomics,andthemayorproposesbuildinganeconomicsmuseum.Themuseumhasafixedcostof$2,400,000andnovariablecosts.Thereare100,000townresidents,andeachhasthesamedemandformuseumvisits:QD=10-P,wherePisthepriceofadmission.a.Graphthemuseum'saveragetotalcostcurveanditsmarginalcostcurve.Whatkindofmarketwoulddescribethemuseum?
2. b.Themayorproposesfinancingthemuseumwithalumpsumtaxof$24andthenopeningthemuseumfreetothepublic.Howmanytimeswouldeachpersonvisit?c.Themayor'santitaxopponentsaysthemuseumshouldfinanceitselfbycharginganadmissionfee.Whatisthelowestpricethemuseumcanchargewithoutincurringlosses?
3. d.Whatrealworldconsiderationsabsentintheaboveproblemmightargueinfavorofanadmissionfee?