3. GB Motor Company produced 600,000 bikes at a price of $440 each. The company made a profit of $60 million that year. The CEO of the company told a journalist that he intended to reduce the price of their bikes to $360, and he expected to sell 900,000 bikes at that price. a) Did GB Motor Company expect the total revenue they receive from selling the bikes to rise or fall following the price cut? b) Use the information provided to calculate the price elasticity of demand for the bikes. c) What would the average total cost of producing 900,000 bikes have to be for GB Motor Company to make as much profit selling 900,000 bikes as it made selling 600,000 bikes? Is this smaller or larger than the average total cost of producing 600,000 bikes? d) Should a monopolistically competitive firm consi der its fixed costs when deciding how much to produce? (Explain in less than 50 words.)

3. GB Motor Company produced 600,000 bikes at a price of $440 each. The company made a profit of $60 million that year. The CEO of the company told a journalist that he intended to reduce the price of their bikes to $360, and he expected to sell 900,000 bikes at that price. a) Did GB Motor Company expect the total revenue they receive from selling the bikes to rise or fall following the price cut? b) Use the information provided to calculate the price elasticity of demand for the bikes. c) What would the average total cost of producing 900,000 bikes have to be for GB Motor Company to make as much profit selling 900,000 bikes as it made selling 600,000 bikes? Is this smaller or larger than the average total cost of producing 600,000 bikes? d) Should a monopolistically competitive firm consi der its fixed costs when deciding how much to produce? (Explain in less than 50 words.)

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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