Question 16 Suppose a firm sells its product in two markets, Market 1 and Market 2, under which it charges separate prices. Also, suppose that the marginal cost (MC) to supply additional units to either market is the same, such that MC₁ = MC2 MC. If the profit-maximizing price in Market 2 is $10, and if the price elasticity of demand in Market 1 is -2 and in Market 2 is -4, then the profit-maximizing price in Market 1 must be $7.50 $20.00 $5.00 $6.67 $15.00 =

Question 16 Suppose a firm sells its product in two markets, Market 1 and Market 2, under which it charges separate prices. Also, suppose that the marginal cost (MC) to supply additional units to either market is the same, such that MC₁ = MC2 MC. If the profit-maximizing price in Market 2 is $10, and if the price elasticity of demand in Market 1 is -2 and in Market 2 is -4, then the profit-maximizing price in Market 1 must be $7.50 $20.00 $5.00 $6.67 $15.00 =

ECON MICRO

5th Edition

ISBN:9781337000536

Author:William A. McEachern

Publisher:William A. McEachern

Chapter5: Elasticity Of Demand And Supply

Section: Chapter Questions

Problem 1.1P: (Calculating Price Elasticity of Demand) Suppose that 50 units of a good are demanded at a price of...

See similar textbooks

Similar questions

If automobiles and gasoline are complements, then their cross-elasticity coefficient is a. strictly greater than 1. b. positive. c. equal to zero. d. negative.
The price elasticity of demand for air travel differs radically from first-class (1.3) to unrestricted coach (1.4) to restricted discount coach (1.9). What do these elasticities mean for optimal prices (fares) on a cross-country trip with incremental variable costs (marginal costs) equal to $120?
Suppose Ford currently sells 250,000 Ford Mustangs annually. The unit cost of a Mustang, including the -delivery cost to a dealer, is $16,000. The current -Mustang price is $20,000, and the current elasticity of -demand for the Mustang is 21.5. a. Determine a profit-maximizing price for a -Mustang. Do this when the demand function is of the constant elasticity type. Do it when the -demand function is linear. b. Suppose Ford makes an average profit of $800 from -servicing a Mustang purchased from a Ford dealer. (This is an average over the lifetime of the car.) How do your answers to part a change?
The manager of the Sell-Rite drug store accidentally mismarked a shipment of 20-pound bags of charcoal at $4.38 instead of the regular price of $5.18. At the end of a week, the store's inventory of 200 bags of charcoal was completely sold out. The store normally sells an average of 150 bags per week. (a)What is the store's arc elasticity of demand for charcoal? (b)Give an economic interpretation of the numerical value obtained in part (a)
Suppose you are the managing director of a firm that produces two goods: A and B. The priceelasticity of demand for good A is 0.75 and for good B it is 2.5. The firm is experiencing seriouscash flow problems and you have to increase total revenue as soon as possible. If you were ina position to set the price for these two goods, what would be your pricing strategy for eachproduct?
The manager of the Sell-Rite drug store accidentally mismarked a shipment of 20- pound bags of charcoal at $3.15 instead of the regular price of $4.25. In a week, a total of 180 bags of charcoal was sold. The store normally sells an average of 120 bags per week. What is the store’s arc elasticity of demand for charcoal? Also make an economic interpretation of the elasticity figure.
a) What is the inverse demand function? b) If the current price is optimal what is then MC?
A garden shop determines the demand function D(p) = 4p+1000 during early summer for %3D 40p+26 comato plants where q is the number of plants sold per day when the price is p dollars per plant. a. Find the price elasticity of demand equation. b. Calculate the price elasticity of demand at a price of $3. Is the demand elastic, inelastic, or unit elastic? How do you know? C. Based on the information in part b, should the garden shop increase, decrease, or leave the price the same at $3 if it wants to increase revenue? Explain. d. Calculate the revenue before the price change and after to support your answer to part c.
A. Using the mid point equation, calculate the price elasticity of demand for the market demand curve for a change from the equilibrium price of $4.00( show the equation and all calculations) is the demand curve elastic or I elastic for this price change? What would happen to the total market revenue if the price changed to $4.00 b. If a new firm(competitor) enters this market so that 6adsitional units are supplied at each price above $0, what would happen to the equilibrium price and quantity and the total market revenue of the market. Add a new market supply curve to your original graph and indicate the new equilibrium price and quantity on the appropriate axes.
At a price of $35, Davidson Cycles rented 22 bicycles. When it increased its rental price to $45, 18 bicycles were rented. Calculate the price elasticity of demand for bicycle rentals using the midpoint formula. (Solution options are given as negatives, the book would have you take the absolute value) O -1.25 O -2.42 O -0.80 O -0.91
5.21 explain
Answer within 45min please Suppose that Andrew’s Hotel will be open for only two days: a peak season day and anoff-peak day. Andrew has two types of costs: room construction costs and guest service costs. Thecost of servicing any guest is 50 dollars. The cost of building a room is 400 dollars, but rooms canbe used for both types of day. Inverse demand for peak days is P = 1000 −Q, and demand foroff-peak is P = 500 −2Q.What prices should Andrew, who is looking to maximize his profits, set, and how many roomsshould he build?