ECO 201 Final Exam Page 15 of 16 Sir Alex Ferguson a soccer

ECO 201, Final Exam: Page 15 of 16 Sir Alex Ferguson, a soccer trainer, has six students who would like to study with him. The reservation price of each student is shown on the table. 4. StudentR Reservation Price Total Revenue Marginal Revenue $50 $50 $47 S50 S40 S36 $32 A. If Alex charges one price to all students, fill in the rest of the table. (3 points) B. If the opportunity cost of Alex\'s time is $27, what price should he charge and how many students would study with him? (2 points) C. If Alex can charge different prices between two groups of students: high school students (A, B, C) and primary school students (D, E, F), fill in the rest of the tables. (4 points) Total High Scbol Resenatin Pieeai High School Reservation Price RevenueMarginal Revenue $50 $50 $50 $47 Total Primary Schoo School Reservation Price Revenue Marginal Revenue $40 S40 $40 S36 S32

Solution

4.

a. If one price is charged for all the students, the smallest reservation price $32 should be considered.

The required table is as below:

Students

Reservation price

Total revenue

Marginal revenue

A

$50

$50

$50

B

$47

$82

$32

C

$44

$114

$32

D

$40

$146

$32

E

$36

$178

$32

F

$32

$210

$32

b. “A” should charge price equal to his opportunity cost. Therefore, he should charge $27 to each student

Since $27 is smaller than each reservation price, all the students (6) would study with him.

Students	Reservation price	Total revenue	Marginal revenue
A	$50	$50	$50
B	$47	$82	$32
C	$44	$114	$32
D	$40	$146	$32
E	$36	$178	$32
F	$32	$210	$32