Microeconomic Theory
12th Edition
ISBN: 9781337517942
Author: NICHOLSON
Publisher: Cengage
expand_more
expand_more
format_list_bulleted
Videos
Textbook Question
Chapter 17, Problem 17.10P
Wonopoly and natural resource prices
Suppose that a firm is the sole owner of a stock of a natural resource.
a. How should the analysis of the maximization of the discounted profits from selling this resource (Equation 17.63 be modified to take this fact into account?
b. Suppose that the demand for the resource in question had a constant elasticity form
c. How would the answer to Problem 17.7 be changed if the entire crude oil supply were owned by a single firm?
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Assume that the quarterly demand for an SUV
produced by an automobile company is Qd :
150,000 – 1.5P, where Qd is quantity demanded
-
and P is price per vehicle.
A. Using the concept of elasticity of demand, what
price should be charged to maximize revenue
from sales of this SUV?
B. Derive the equation for total revetiue for this
product. Clearly show you steps.
C Using (b) above, determine the unit price that
maximizes total revenue from sales.
Smooth Sailing, Inc., has estimated the demand function for its sailboats (quantity purchased annually) as follows:
QD= 89,830-40PS+20Px+15Py+2I+0.001A+10W
Where,
QD = quantity purchased,
PS = the price of smooth sailing sailboats,
PX = the price of Company X’s sailboat,
PY = the price of Company Y’s motorboat,
I = per capita income in dollars,
A = dollars spent on advertising, and
W = number of favorable days of weather in the southern region of the United States.
Suppose that PS = $9,000, PX = $9,500, PY = $10,000, I = $15,000, A = $170,000, and W = 160. Find the price elasticity of demand at that point.
Is elastic, inelastic, or unitary elastic in part (a)? Justify?
5.21 explain
Chapter 17 Solutions
Microeconomic Theory
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.Similar questions
- If automobiles and gasoline are complements, then their cross-elasticity coefficient is a. strictly greater than 1. b. positive. c. equal to zero. d. negative.arrow_forwardThe price elasticity of demand for air travel differs radically from first-class (1.3) to unrestricted coach (1.4) to restricted discount coach (1.9). What do these elasticities mean for optimal prices (fares) on a cross-country trip with incremental variable costs (marginal costs) equal to $120?arrow_forwardRefer to the company that you proposed in the previous question. For each scenario below, use a supply and demand analysis to make a prediction regarding both the equilibrium price and quantity for your good or service. That is, for each part, tell me whether you expect the equilibrium price of your product to rise or fall AND whether you expect equilibrium quantity to rise or fall. Also include in your explanation which curve is shifting and which shifter variable is affected. a) Your customers’ incomes increase. Be sure to note whether the good or service you are providing is a normal good or an inferior good. b. The minimum wage is raised in your area, and you must pay your employees more. (Assume you have employees for this scenario, even if that was not part of your initial plan.) c. A firm that offers the same good or service moves into town. d. Your customers expect the price of your good or service to fall in the future. e. The price of a good or service that…arrow_forward
- The demand for Amazon 's Kindle e-reader can be approximated by q(p)=21e−0.01pmillionunitsperyear(50≤p≤400), where p is the price charged by Amazon. Obtain a formula for price elasticity of demand E, and calculate its value at the two endpoints of the given range of prices. Is the price that would maximize annual revenue within the range of prices shown? How would you know this without calculating that price?arrow_forwardCalculate the price elasticity, cross-price elasticity, and income elasticity of demand for cement. Explain these figures.arrow_forwardIn Example 2.8, we examined the effect of a 20-percent decline in copper demand on the price of copper, using the linear supply and demand curves developed in Section 2.6. Suppose the long-run price elasticity of copper demand were -0.80 instead of -0.50. Assuming, as before, that the equilibrium price and quantity are P* = $3 per pound and Q = 18 million metric tons per year, derive the linear demand curve consistent with the smaller elasticity. With a long-run price elasticity of -0.80, the linear demand curve is OA. Q=33.40-4.80P. OB. Q 32.40-6.80P. OC. Q=33.40+ 6.80P. OD. Q 32.40-4.80P. OE. Q=32.40 + 4.80P.arrow_forward
- Harding Enterprises has developed a new product called the “Quest Simulator (QS)”. The market demand for this product is given as follows: Q = 240 - 4P. If QS is priced at $40, what is the point price elasticity of demand? Is demand elastic or inelastic? What is the maximum amount that consumers are willing to pay for the quantity demanded at the price of $40? (hint: it includes both the total expenditures and the consumer surplus) If the price of QS is increased slightly from $40, what will happen to the total expenditure on the product? What will happen to the consumer surplus? 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_forwardThe market research conducted by a firm in the drinking water industry shows that the demand for water has a constant elasticity equal to − 1/? where ? is 9 a) Express the demand function in the form of a differential equation b, Find the general solution for the differential equation by expressing Q (the quantity demanded) as a function of P (the product price). c, ) Suppose that the demand for bananas has a constant elasticity equal to – 9. Explain in words (without providing any calculation) how decreasing the price would affect a banana seller’s total revenue and profits. Please help me. Thank you so much.arrow_forwardYou would like to control the total consumption of soft drink up to 100 bottles per year. The current two brands you drink are Pepsi and Coke. The current demand, price, elasticity, and minimum demand for Pepsi and Coke are given in below. In addition, you would like to keep equal or more demand from Pepsi due to brand loyalty. Assuming linear demand curves, what are the best price for Pepsi and Coke that can minimize your total payment? Elasticity Current price Demand Minimum demand Keep Pepsi income > = 60% of total payment Pepsi 2 2 300 20 Coke 1 3.5 220 25arrow_forward
- The Potomac Range Corporation manufactures a line of microwave ovens costing $500 each. Its sales have averaged about 6,000 units per month during the past year. In August, Potomac’s closest competitor, Spring City Stove Works, cut its price for a closely competitive model from $600 to $450. Potomac noticed that its sales volume declined to 4,500 units per month after Spring City announced its price cut. a. What is the arc cross elasticity of demand between Potomac’s oven and the competitive Spring City model? b. Would you say that these two firms are very close competitors? What other factors could have influenced the observed relationship? c. If Potomac knows that the arc price elasticity of demand for its ovens is −3.0, what price would Potomac have to charge to sell the same number of units it did before the Spring City price cut?arrow_forwardSmooth Sailing, Inc., has estimated the demand function for its sailboats (quantity purchased annually) as follows: = 89, 830 – 40P, + 20PX + 15P, + 21 + 0.001A + 10W Where, QD = quantity purchased, Ps = the price of smooth sailing sailboats, Px= the price of Company X's sailboat, Pr= the price of Company Y's motorboat, I= per capita income in dollars, A = dollars spent on advertising, and W = number of favorable days of weather in the southern region of the United States. a) Suppose that Ps = $9,000, Px = $9,500, Pr = $10,000, I = $15,000, A = $170,000, and W = 160. Find the price elasticity of demand at that point. b) Is E, elastic, inelastic, or unitary elastic in part (a)? Justify?arrow_forwardAnswer only subpart 4arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Managerial Economics: Applications, Strategies an...EconomicsISBN:9781305506381Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. HarrisPublisher:Cengage Learning
Managerial Economics: Applications, Strategies an...
Economics
ISBN:9781305506381
Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher:Cengage Learning
Forecasting: Exponential Smoothing, MSE; Author: Joshua Emmanuel;https://www.youtube.com/watch?v=k_HN0wOKDd0;License: Standard Youtube License