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The residents of the town Ectenia all love econom-ics, and

Principles of Microeconomics | 7th Edition | ISBN: 9781285165905 | Authors: N Gregory Mankiw ISBN: 9781285165905 94

Solution for problem 6 Chapter 15

Principles of Microeconomics | 7th Edition

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Principles of Microeconomics | 7th Edition | ISBN: 9781285165905 | Authors: N Gregory Mankiw

Principles of Microeconomics | 7th Edition

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Problem 6

The residents of the town Ectenia all love econom-ics, and the mayor proposes building an economics museum. The museum has a fixed cost of $2,400,000 and no variable costs. There are 100,000 town residents, and each has the same demand for museum visits: QD= 10 P, where P is the price of admission.a.Graph the museums average-total-cost curve and its marginal-cost curve. What kind of market would describe the museum?b.The mayor proposes financing the museum with a lump-sum tax of $24 and then opening the museum to the public for free. How many times would each person visit? Calculate the benefit each person would get from the museum, measured as consumer surplus minus the new tax.c.The mayors antitax opponent says the museum should finance itself by charging an admission fee. What is the lowest price the museum can charge without incurring losses? (Hint: Find the number of visits and museum profits for prices of $2, $3, $4, and $5.)d.For the break-even price you found in part (c), cal-culate each residents consumer surplus. Compared with the mayors plan, who is better off with this admission fee, and who is worse off? Explain.e.What real-world considerations absent in the problem above might provide reasons to favor an admission fee?

Step-by-Step Solution:

Q: The residents of the town Ectenia all love economics, and the mayor proposes building aneconomics museum. The museum has a fixed cost of $2,400,000 and no variable costs. Thereare 100,000 town residents, and each has the same demand for museum visits: Q = 10 - P,where P is the price of admission. a. Graph the museum's average-total-cost curve and its marginal-cost curve. What kind of market would describe the museum b. The mayor proposes financing the museum with a lump-sum tax of $24 and then opening the museum to the public for free. How many times would each person visit Calculate the benefit each person would get from the museum, measured as consumer surplus minus the new tax. c. The mayor's anti tax opponent says the museum should finance itself by charging an admission fee. What is the lowest price the museum can charge without incurring losses (Hint: Find the number of visits and museum profits for prices of $2, $3, $4, and $5.) d. For the break-even price you found in part (c), calculate each resident's consumer surplus. Compared with the mayor’s plan, who is better off with this admission fee, and who is worse off Explain. e. What real-world considerations absent in the problem above might provide reasons to favor an admission fee Step-by-step solution Step 1 of 7a.Building a museum has a fixed costs of $2,400,000, and no variable costs. The average totalcost function is as follows: 2,400,000 ATC = Qwhere Q represents quantity produced.

Step 2 of 7

Chapter 15, Problem 6 is Solved
Step 3 of 7

Textbook: Principles of Microeconomics
Edition: 7
Author: N Gregory Mankiw
ISBN: 9781285165905

Principles of Microeconomics was written by and is associated to the ISBN: 9781285165905. This full solution covers the following key subjects: . This expansive textbook survival guide covers 22 chapters, and 222 solutions. The answer to “The residents of the town Ectenia all love econom-ics, and the mayor proposes building an economics museum. The museum has a fixed cost of $2,400,000 and no variable costs. There are 100,000 town residents, and each has the same demand for museum visits: QD= 10 P, where P is the price of admission.a.Graph the museums average-total-cost curve and its marginal-cost curve. What kind of market would describe the museum?b.The mayor proposes financing the museum with a lump-sum tax of $24 and then opening the museum to the public for free. How many times would each person visit? Calculate the benefit each person would get from the museum, measured as consumer surplus minus the new tax.c.The mayors antitax opponent says the museum should finance itself by charging an admission fee. What is the lowest price the museum can charge without incurring losses? (Hint: Find the number of visits and museum profits for prices of $2, $3, $4, and $5.)d.For the break-even price you found in part (c), cal-culate each residents consumer surplus. Compared with the mayors plan, who is better off with this admission fee, and who is worse off? Explain.e.What real-world considerations absent in the problem above might provide reasons to favor an admission fee?” is broken down into a number of easy to follow steps, and 205 words. The full step-by-step solution to problem: 6 from chapter: 15 was answered by , our top Business solution expert on 09/09/17, 04:24AM. Since the solution to 6 from 15 chapter was answered, more than 1383 students have viewed the full step-by-step answer. This textbook survival guide was created for the textbook: Principles of Microeconomics, edition: 7.

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