Question 6 Suppose that a firm currently sells its product at a price of P = 30. The firm has recently discovered that there are some "high demand" costumers, with individual demand functions Q(P) = 40- P. The firm wants to offer a "contract" to these costumers which would allow them for a fixed fee F to purchase the good for 20 Dollars per unit. Determine the maximum value of F that the firm could charge such that high demand costumers would be willing to buy the contract. %3D F =

Question 6 Suppose that a firm currently sells its product at a price of P = 30. The firm has recently discovered that there are some "high demand" costumers, with individual demand functions Q(P) = 40- P. The firm wants to offer a "contract" to these costumers which would allow them for a fixed fee F to purchase the good for 20 Dollars per unit. Determine the maximum value of F that the firm could charge such that high demand costumers would be willing to buy the contract. %3D F =

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...

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In 2003, when music downloading first took off, Universal Music slashed the average price of a CD from $21 to $15. The company expected the price cut to boost the quantity of CDs sold by 30 percent, other things remaining the same. What was Universal Music’s estimate of the price elasticity of demand for CDs? If you were making the pricing decision at Universal Music, what would be your pricing decision? Explain your decision.Typed and correct answer please. I ll rate
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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?
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