Author Question: For a demand curve that is horizontal, the marginal revenue curve A) will be to the right of the ... (Read 150 times)

ARLKQ · **on:** Jul 1, 2018

For a demand curve that is horizontal, the marginal revenue curve

A) will be to the right of the demand curve and half as steep.
B) will be to the left of the demand curve and half as steep.
C) will be to the right of the demand curve and twice as steep.
D) will be the same as the demand curve.

Question 2

Simon is given a free ticket to see Coldplay Saturday night. He already has a ticket to see Sting in concert that night. The Sting ticket cost Simon 50 though he would have paid as much as 80 to go to the show.

Simon knows that he can easily sell the Sting ticket on Craigslist for 60. What is his opportunity cost of seeing Coldplay?

akemokai · **Reply #1 on:** Jul 1, 2018

Answer to Question 1

D

Answer to Question 2

If Simon did not go to Coldplay, he would see Sting, since he values seeing Sting for more than the resale value of the ticket. If he goes to Coldplay he can sell the Sting ticket, making an economic loss of 20 (80 - 60). Thus, the opportunity cost of seeing Coldplay is 20. Note: the 50 is not relevant in the calculations because the resale value is 60, not 50.