Suppose a firm sells two goods, Good A and Good B. Use the following information to answer questions that follow: Profit maximising price of Good A = R200 Profit maximising price of Good B = R75 MC at Q* of Good A = R120 Total revenue of Good A = R26000 Total revenue of Good B = R24000 Rothschild index of Good B = 0.4 Price elasticity of the market demand for Good B = -2 2.1. Calculate each of the following: Ed of Good A = ____________ Ed of Good B =__________ MC at Q* of Good B = R___________ 2.2 Suppose that the firm noticed that when it increased the price of Good A from R200 to R300, the sales of Good B decreased from 1000 to 600 units. Calculate and classify the cross-price elasticity of demand between Good A and Good B. Ec =____________ Good A and Good B are classified as (substitutes/compliments) 2.3. Use the elasticity coefficient calculated above and the information provided, to calculate by how much the firm’s total combined revenue will change if it decreases the price of Good A by 3%? Change in combined total revenue = R__________
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Suppose a firm sells two goods, Good A and Good B. Use the following information to answer questions that follow:
Profit maximisingprice of Good A = R200
Profit maximising price of Good B = R75
MC at Q* of Good A = R120
Total revenue of Good A = R26000
Total revenue of Good B = R24000
Rothschild index of Good B = 0.4
Price elasticity of the marketdemand for Good B = -2
2.1. Calculate each of the following:
Ed of Good A = ____________
Ed of Good B =__________
MC at Q* of Good B = R___________
2.2 Suppose that the firm noticed that when it increased the price of Good A from R200 to R300, the sales of Good B decreased from 1000 to 600 units. Calculate and classify the cross-price elasticity of demand between Good A and Good B.
Ec =____________
Good A and Good B are classified as (substitutes/compliments)
2.3. Use the elasticity coefficient calculated above and the information provided, to calculate by how much the firm’s total combined revenue will change if it decreases the price of Good A by 3%?
Change in combined total revenue = R__________
2.4 Suppose the firm is currently selling 320 units of Good B. Calculate the change in the quantity demanded (in both percentage and in units), if the firm decreases the price of Good A by 3%.
Percentage change in Qd =____________
Change in units =__________
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Highest price where quantity of output is equal to zero = R1200
P*= R650
MC at Q*= R260
AFC at Q*= R300
Price at
Allocative efficient level of output = 180 units
Total fixed cost = R33000
MC at output equal to zero = R100
1.1. Assuming profit maximising behaviour, calculate each of the following for Firm M.
Q*= units
Lerner index =
Mark-up =
Deadweight-loss = R
TVC = R
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