2. In a small college town there is only one movie theater. If the theater is open, the

owners have to pay a fixed amount of $6,000 for the films, ushers, etc., regardless of

how many people come to the movie. For simplicity, assume that if the theater is closed,

its costs are zero. The demand function for movies in the town is characterized by PT =

45

_QT

60

a. Draw the market demand curve, the marginal revenue curve, and the

marginal cost curve. Make sure to label the axes, curves, and intercepts.

b. Find the profit-maximizing price and quantity of movie tickets and indicate

them on your graph. How much would the theater make in profits?

c. Calculate the deadweight loss caused by the monopoly and indicate the area on

your graph.