Please draw the graphs!! Thank you, will rate 5 stars. Suppose Frances gives hai
ID: 1199783 • Letter: P
Question
Please draw the graphs!! Thank you, will rate 5 stars.
Suppose Frances gives haircuts on Saturdays to make extra money. She is the only person in town cutting hair on Saturdays and therefore has some market power. Assume that she does not incur fixed costs, and the only significant variable cost to Frances in giving haircuts is her time. As she gives more haircuts, Frances must increasingly forgo other valuable Saturday activities. For example, if she gives one haircut, she forgoes reading the paper after breakfast. If she gives two haircuts, she gives up reading the paper, sleeping an extra half-hour, and so on Frances's clients are a varied group willing to pay between $20.00 and $36.00 for a haircut. Assume that Frances cannot charge her varied clients different prices. If Frances charges $36.00 per haircut, she can have one client per week; if she charges $32.00, she can have two; if she charges $28.00, three, and so forth. The following table contains data for the revenues and costs of Frances's haircut business as a function of her price-quantity choice. (The costs are based on the value of Frances's alternative activities, in dollar terms. For example, the total cost of the first haircut is 3.00-the value to Frances of being able to read the paper after breakfast.) Also, marginal profit is the additional profit Frances earns from producing one more unit of output. Marginal profit is positive when a rise in output increases total profit and negative when a rise in production causes total profit to fall Fill in the missing cells of the table and then use them to answer the questions that follow Total Marginal Revenue Total Cost Quantity (Haircuts per week) Marginal Cost (MC = ATC/Q) Profit (Dollars per week) ($) Marginal Profit (Dollars per haircut) ($) Price Revenue (P) ($) (TC) ($) (TR = Q x P) (Dollars per haircut) () 36.00 32.00 28.00 24.00 20.00 36.00 64.00 84.00 36.00 28.00 20.00 3.00 6.00 11.00 17.00 30.00 3.00 3.00 5.00 33.00 58.00 73.00 33.00 25.00 15.00 4 100.00 4.00 13.00 70.00 -9.00Explanation / Answer
The TR,TC and Profits curves are:
Now We plot the MR and MC graphs:
Frances maximises profits by serving 4.5 per week and charging $24 per haircut.
Frances marginal revenue is less thanher marginal cost of giving hair cut
Quantity Price Total Revenue Marginal Revenue Total cost Marginal Cost Profits Marginal profits 0 $0 0 0 0 0 0 0 1 $36.00 $36.00 $36.00 $3.00 $3.00 $33.00 $33.00 2 $32.00 $64.00 $28.00 $6.00 $3.00 $58.00 $25.00 3 $28.00 $84.00 $20.00 $11.00 $5.00 $73.00 $15.00 4 $24.00 $96.00 $12.00 $17.00 $6.00 $79.00 $6.00 5 $20.00 $100.00 $4.00 $30.00 $13.00 $70.00 -$9.00