Managerial Economics: A Problem Solving Approach
5th Edition
ISBN: 9781337106665
Author: Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher: Cengage Learning
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Chapter 12, Problem 8MC
To determine
Change in
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A firm started advertising its product and this changed the product’s elasticity from -2 to -1.5. If, prior to advertising, the firm was maximizing profit by charging $10, the firm should
a. raise price from $10 to $15
b. reduce price from $10 to $6.67
c. raise price from $10 to $13.33
d. reduce price from $10 to $7.50
Note:-
Please refrain from offering handwritten solutions. Please ensure that your response maintains accuracy and quality to avoid receiving a downvote.
Take care of plagiarism.
Answer completely.
You will get up vote for sure.
The supermarket is selling 2,000 containers of margarine a week at $2.50 each. You know that the own price elasticity of demand for margarine is -0.8. If the supermarket decides to reduce the price by 10%, how many more margarines would the supermarket be selling that week? Show your work.
Question 1 Danny “Dimes” Donahue is a neighborhood’s 9-year-old entrepreneur. His most recent venture is selling homemade brownies that he bakes himself. At a price of $1.5 each, he sells 250. At a price of $1 each, he sells 300.
Instructions: Use the midpoint method and round your answer to 2 decimal places. Do not include a minus sign.
a. What is the elasticity of demand?
Question 2
Linda sells 100 bottles of homemade ketchup for $10 each. The cost of the ingredients, the bottles, and the labels was $700. In addition, it took her 20 hours to make the ketchup and to do so she took time off from a job that paid her $20 per hour.
Instructions: Enter your answers as whole numbers.
Linda's accounting profit is:
Linda's econmica profit is:
Question 3 Gomez runs a small pottery firm. He hires one helper at $11,500 per year, pays annual rent of $7,000 for his shop, and spends $22,500 per year on materials. He has $40,000 of his own funds invested in equipment (pottery wheels, kilns, and…
Chapter 12 Solutions
Managerial Economics: A Problem Solving Approach
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- The price elasticity of the demand for gasoline is -0.02. The price elasticity of demand for gasoline at Joe’s 66 station is -1.2. Explain what might account for the different elasticities.arrow_forwardGood or Service Price Elasticity Income Elasticity Beef -0.5 0.51 Long Distance Telephone -0.32 1.2 Cigarettes All smokers -0.7 0.9 Ages 15-18 -1.4 1.5 What will happen to sales for long-distance telephone if its price increases by 5% and income increases by 8%? Select one: a. Sales will decrease by 5%. b. Sales will increase by 5%. c. Sales will decrease by 8%. d. Sales will increase by 8%.arrow_forwardProblem 1: Ralph advertises to sell cookies for Php 200 a dozen. He sells 75 dozen and decides that he can charge more. He raises the price to Php 300 a dozen and sells 45 dozen. What is the elasticity of demand?arrow_forward
- Due to the COVID-19, the price of hand-sanitizer increases from 150 taka to 250 taka. In response, the quantity demanded declines from 20 units to 15 units.(a) Calculate the price elasticity of demand. (b) Explain if the demand is elastic or inelastic. Based on the elasticity, what change (increase, decrease, or keep it the same) in price the seller can do to maximize his total revenue? Explain your answer. Please answer Step by step. Answer must be correct.Do all calculation step by step.Don,t copy from any where. Must answer follow question.arrow_forwarda. Following your review of elasticity, will the elasticity of demand for Nissansedans increase, decrease, or remain the same when each of the followingevents occurs? Explain your answer. i. Other car manufacturers, such as Honda, decide to make and sellsedans. ii. Sedans produced in foreign countries are banned from the Europeanmarket. iii. Following increased advertisements, Americans believe that sedans areless safe than ordinary passenger cars. iv. In the long run, new sedan models are produced.arrow_forwardKatherine advertises to sell cookies for $4 a dozen. She sells 50 dozen, and decides that she can charge more. She raises the price to $6 a dozen and sells 40 d0zen. What is the elasticity of demand? Assuming that the elasticity of demand is constant, how many would she sell if the price were $10 a box? (Show complete solution)arrow_forward
- When a walk-in clinic spent $5,000 a year on newspaper advertising, it saw 5,000 patients a year. When it increased its annual advertising expenditure to $7,500 per year, it saw 10,000 patients a yeara. What is the change in advertising expenditures?b.What is the change in patient visits?c. What is the advertising elasticity of demand?d. Do you think the increase in advertising expenditures was worthwhile and why?arrow_forwardJohn owns a bread bakery. When he increases the price of a loaf of bread from R10 to R12, the percentage in the quantity demanded is 5%. Calculate the price elasticity of demand for bread.arrow_forwardIf the price of Moonlight massage oil decreases from $3 to $2.50 and, as a result, total revenue of $6,000 does not change, what is the elasticity of demand? Multipie Choice 0.22 0.55 1. 1.2 1.67 Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.arrow_forward
- Snooki, a new marketing intern, was a little scatterbrained during the first meeting with her manager, when she made four statements about pricing. Which one of her four statements about pricing was correct? a. A product with an elastic demand is likely to face little competition. b. An EDLP retailer offers many price promotions. c. A product with an elasticity of demand of -0.7 will enjoy increases in revenue when prices are cut. d. Cost-plus pricing is not the perfect pricing strategy because the pricing method ignores customers’ willingness to pay and competitors’ pricing strategy.arrow_forwardRefer to the Figure below. If the price of a hamburger increases from $8 to $10, the price Use the midpoint formula. elasticity of demand equals $ 4 10 8 6. E F 2 D 1 2 3 4 5 Number of hamburgers -3.0 -33 O -30 -0.33 Price 4.arrow_forwardPepsi sells many types of soft drinks and its researchers found that the demand elasticity for Mountain Dew is 4.4, what should Pepsi (owners of Mountain Dew) do to their price to earn the most revenue? Question 9 options: Advertise more set the price as high as possible set the price as low as possible consider producing a type of drink with a more elastic demandarrow_forward
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