Suppose that the inverse demand curve for iced tea is given by p = 70 12q,where P is the price per bottle paid by consumers and q is the number of bottlespurchased by consumers.Iced tea is supplied to consumers by a monopolistic distributor who buysfrom a monopolistic producer, who is able to produce iced tea at zero cost.The producer charges the distributor a price of c per bottle. Given hismarginal cost of c per unit, the distributor chooses an output to maximize hisown profits. Knowing that this is what the distributor will do, the producersets his price c in trder to maximize his revenue.A. How much will consumers pay for iced tea?B. Now assume that the producer buys the distributor and markets the gooddirectly to the consumers. How much will consumers pay for Ice tea then?C. How much is the producer willing to pay to purchase the distributor?

Inverse demand function: P=70-12q Producers marginal cost=0 Distributer purchases iced tea from a…

Answered: Suppose that the inverse demand curve…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Suppose a local supermarket runs a discount campaign on the sales of shampoos using discount coupons – any customer who shows a discount coupon will be offered an 20% discount on the original retail price. Discuss TWO practical limitations for the supermarket to conduct coupon discount.
UCOM is able to purchase an exclusive right to sell a soccer channel (SC) in its market area. Let's assume that UCOM pays $150,000 a year for the exclusive marketing rights to SC. Since UCOM has already installed cable to all of the homes in its market area, the marginal cost of delivering Soccer Channel to subscribers is zero. The manager of UCOM needs to know what price to charge for the Soccer Channel service to maximize her profit. Before setting price, she hires an economist to estimate demand for the Soccer channel service. The economist discovers that there are two types of subscribers who value soccer. First are the 4,000 die-hard soccer fans who will pay as much as $150 a year for the new soccer channel. Second, the soccer channel will appeal to about 20,000 occasional TV viewers who will pay as much as $20 a year for a subscription to soccer channel. What is the deadweight loss associated with the non-discriminating pricing policy compared to the price discriminating…
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I understand how to compute the revenue but I'm stuck on computing the elasticity.

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