Microeconomics
21st Edition
ISBN: 9781259915727
Author: Campbell R. McConnell, Stanley L. Brue, Sean Masaki Flynn Dr.
Publisher: McGraw-Hill Education
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Question
Chapter 10.6, Problem 4QQ
To determine
Percentage changes in price.
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Marketers strive to deliver a profitable product for their firm. Marketers must understand break-even point calculations and sales targets. Your firm has the ability to produce and sell 10,000 units with a variable costs are $350 per unit and your fixed costs are $250,000, what price must you charge to achieve $100,000 gross profit? Show your equations and calculations.
short answer
A bakery that produces 100 loaves of bread has a variable cost of $50 and a fixed
cost of $200. Calculate the total cost, average total cost, average variable cost,
and average fixed cost of the bakery.
50 units of an output is supplied when the price is OMR 10. When price increases
to OMR 20, the units of output supplied will be 80. Calculate elasticity of supply
and comment on its elasticity.
1. Estimated Demand. You are the manager of a firm that sells packs of coffee pods for coffee makers. You typically sell the packs for $24 and sell an average of 2,470 packs per month. You decide to raise the price to $28 per pack. When you do this your monthly sales fall to 1,482 packs per month.
a. Assuming that your firm’s demand function is linear (i.e., takes the form QP=a-bP), calculate the linear demand function for the packs
2. Markups and elasticities. The marginal cost (MC) of producing your product is $16
a. Using the estimated demand curve from the previous question, calculate the point price elasticities of demand at the two price from question 1
b. Use the markups and elasticities and indicate whether the two prices are higher or lower than the profit maximizing price.
NOTE: YOU DO NOT NEED TO CALCULATE THE PROFIT MAXIMIZING PRICE YET.
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