3) Suppose you are the owner of a movie theater in Palouse, WA and have booked a summer box office hit into your single theater. You are now planning the length of its run. Your share of the

film’s projected box-office is R = 10W – 0.25W2, where R = revenue ($1,000) and W is the number of weeks that the movie runs. The average operating costs of your theater is AC = MC =$4 thousand per week.

a. To maximize your profit, how many weeks should the movie run? What is your profit?

b. You realize that your typical movie makes an average operating profit of $1.5 thousand per week. How does this fact affect your decision in part (a), if at all? Briefly explain.

c. In the last 25 years, stand-alone movie theaters have given way to cineplexes with 4 to 10 screens and megaplexes with 10 to 30 screens under one roof. During the same time, total annual movie admissions have barely changed. What cost factors can explain this trend? In addition, what demand factors might be also be relevant?

d. The film’s producer anticipated an extended theater run (through Labor Day) and accordingly decided to move back the DVD release of the film from Thanksgiving to New

Year’s Day. Does the decision to delay make sense? Please explain.