4. Jimmy’s room overlooks a major league baseball stadium. He decides to rent a telescope for $50.00 a week and charge his friends to use it to peep at the games 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. This table shows the information Jimmy has gathered about the weekly demand for the service.
| 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 |
For each price in the table, calculate the total revenue from selling peeps and the marginal revenue per peep.
At what quantity will Jimmy’s profit be maximized? What price will he charge? What will his total profit be?
Jimmy’s landlady complains about all the visitors and tells him to stop selling peeps. But, if he pays her $0.20 for every peep he sells, she won’t complain. 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?