Jimmy has a room that overlooks, from some distance, a major league baseball stadium. He decides to rent a telescope for $50.00 a week and charge his friends and classmates to use it to peep at the game for 30 seconds. He can act as a single-price monopolist for renting out "peeps." For each person who takes a 30-second peep, it costs Jimmy $0.20 to clean the eyepiece. The accompanying table shows the information Jimmy has gathered about the demand for the service in a given week.
Price of peep Quantity of peeps demanded
$1.20……………………………. 0
1.00……………………………... 100
0.90……………………………... 150
0.80……………………………... 200
0.70……………………………... 250
0.60……………………………... 300
0.50……………………………... 350
0.40……………………………... 400
0.30……………………………... 450
0.20……………………………... 500
0.10……………………………... 550
a. For each price in the table, calculate the total revenue from selling peeps and the marginal revenue per peep.
b. At what quantity will Jimmy's profit be maximized? What price will he charge? What will his total profit be?
c. Jimmy's landlady complains about all the visitors coming into the building and tells Jimmy to stop selling peeps. Jimmy discovers, however, that if he gives the landlady $0.20 for every peep he sells, she will stop complaining. What effect does the $0.20-per-peep bribe have on Jimmy's marginal cost per peep? What is the new profit-maximizing quantity of peeps? What effect does the $0.20-per-peep bribe have on Jimmy's total profit?