Don't use Ai and chatgpt.Answer in step by step with explanation. Suppose a pizzeria, appropriately named, "MPA =Master's of Pizza Administration" (which hasunfortunately occasionally been confused with the "Master's of Propane Administration") sells 500 cheesepizzas when the price is $10/pizza, and 1,100 cheesepizzas when the price is $8/pizzaa. (3) Use these figures to calculate the price elasticityof demand for cheese pizzas.b. (3) What is the marginal revenue associated withthe additional 600 pizzas sold when the price is $8/pizza?c. (3) Suppose the marginal cost of each pizza is $7/pizza. What price should the pizzeria charge: $8/pizza or $10/pizza? Briefly explain why.

Part (a) - Price Elasticity of Demand (PED)Price elasticity of demand (PED) tells us how sensitive…

Answered: Suppose a pizzeria, appropriately…

Principles of Microeconomics

7th Edition

ISBN:9781305156050

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter5: Elastic And Its Application

Section: Chapter Questions

Problem 6PA: Suppose that your demand schedule for DVDs is as follows: Price Quantity Demanded (income = 10,000)...

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(Calculating Price Elasticity of Demand) Suppose that 50 units of a good are demanded at a price of Si per unit. A reduction in price to $0.20 results in an increase in quantity demanded to 70 units. Using the midpoint formula, show that these data yield a price elasticity of 0.25. By what percentage would a 10 percent rise in the price reduce the quantity demanded, assuming price elasticity remains constant along the demand curve?
The Stopdecay Company sells an electric toothbrush for $25. Its sales have averaged 8,000 units per month over the past year. Recently, its closest competitor, Decayfigh ter, reduced the price of its electric toothbrush from $35 to $30. As a result, Stopde cays sales declined by 1,500 units per month. What is the arc cross elasticity of demand between Stopdecays toothbrush and Decayfighters toothbrush? What does this indicate about the relationship between the two products? If Stopdecay knows that the arc price elasticity of demand for its toothbrush is 1.5, what price would Stopdecay have to charge to sell the same number of units as it did before the Decayfighter price cut? Assume that Decayfighter holds the price of its toothbrush constant at $30. What is Stopdecays average monthly total revenue from the sale of electric toothbrushes before and after the price change determined in part (b)? Is the result in part (c) necessarily desirable? What other factors would have to be taken into consideration?
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