ECS2601
Assignment 1
(COMPLETE ANSWERS)
Semester 1 2025
(655050)
DUE 2 April 2025
, ACTIVITIES
QUESTION 1 In microeconomics, several factors influence consumer decision-making. Discuss five key
factors that impact consumer choices. QUESTION 2. Shooting Star Books is a small publishing
company that specializes in science fiction books. Like most publishers, Shooting Star releases new
books in hard-cover form and later releases paper-back versions of the books. The marginal cost of
printing both types of books is R2 per. QUESTION 3. Internet service in the local market is supplied by
Lauraʹs Internet Service. The demand is QD = 6,500 - 100P ⇔ P = 65 - 0.01Q. Lauraʹs marginal cost
function is MC(Q) = 6.67 + 0.0067Q If Laura practices first-degree price discrimination, what are
consumer surplus and Lauraʹs producer surplus in this market? Does Lauraʹs market power and first-
degree price discrimination result in reduced societal welfare? book, and Shooting Star maximizes
profits by practicing intertemporal price discrimination. The annual demand for recently released
(hard-cover) books is Q1 = 400 — 10P1 where quantity demanded is measured in thousands of
books and price is measured in dollars per book. The annual demand for the paper-back version of
previously released books is Q2 = 800 — 40P2. a. What are the marginal revenue curves associated
with the two demand curves for books? b. What are the profit maximizing prices for hard-cover and
paper-back books? What are the quantities of books demanded at these prices for hard-cover and
paper-back books? c. Suppose the market demand for paper-back books shifts to Q2 = 150 —
100P2. How does this change affect the profit maximizing price and quantity in the paper-back book
market? Does this change affect the profit maximizing outcome in the hard-cover book market?
Assignment 1
(COMPLETE ANSWERS)
Semester 1 2025
(655050)
DUE 2 April 2025
, ACTIVITIES
QUESTION 1 In microeconomics, several factors influence consumer decision-making. Discuss five key
factors that impact consumer choices. QUESTION 2. Shooting Star Books is a small publishing
company that specializes in science fiction books. Like most publishers, Shooting Star releases new
books in hard-cover form and later releases paper-back versions of the books. The marginal cost of
printing both types of books is R2 per. QUESTION 3. Internet service in the local market is supplied by
Lauraʹs Internet Service. The demand is QD = 6,500 - 100P ⇔ P = 65 - 0.01Q. Lauraʹs marginal cost
function is MC(Q) = 6.67 + 0.0067Q If Laura practices first-degree price discrimination, what are
consumer surplus and Lauraʹs producer surplus in this market? Does Lauraʹs market power and first-
degree price discrimination result in reduced societal welfare? book, and Shooting Star maximizes
profits by practicing intertemporal price discrimination. The annual demand for recently released
(hard-cover) books is Q1 = 400 — 10P1 where quantity demanded is measured in thousands of
books and price is measured in dollars per book. The annual demand for the paper-back version of
previously released books is Q2 = 800 — 40P2. a. What are the marginal revenue curves associated
with the two demand curves for books? b. What are the profit maximizing prices for hard-cover and
paper-back books? What are the quantities of books demanded at these prices for hard-cover and
paper-back books? c. Suppose the market demand for paper-back books shifts to Q2 = 150 —
100P2. How does this change affect the profit maximizing price and quantity in the paper-back book
market? Does this change affect the profit maximizing outcome in the hard-cover book market?
