Q1. You own a small town movie theatre. You currently charge $5 per ticket for everyone who comes to your movies. Your friend who took an economics course in college tells you that there may be a way to increase your total revenue. Given the demand curves. What is your current total revenue for both groups?
Q2. Tom, Dick, and Harry, the only three people on a desert island with two consumption goods, apples and bananas, have utility functions UT, UD, and UH, respectively, where:
UT (xa, xb) = 6xa+9xb UD (xa, xb) = 8xa+12xb UH (xa, xb) = xaxb2
a.) Relative to Tom, does Dick require more bananas, less bananas, or the same number of bananas to give away an apple? Why?
b) Suppose Harry has 3 apples and 2 bananas. Would he be willing trade an apple for a banana? Show why or why not.