Principles of Economics (12th Edition)
12th Edition
ISBN: 9780134078779
Author: Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher: PEARSON
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Chapter 7, Problem 3.3P
To determine
Decision making.
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Elvira College has an enrollment of 1,000 students and is located in a small Midwestern town named Johnsonville. Johnsonville has a total population of 2,500 people. The nearest town is 20 miles away. Most of the residents shop locally, but they travel about once a month to the larger city and pick up the large-ticket items. Johnsonville has one fairly good-size supply store named Jameson's Grocery. The only other place in town where you might buy supplies is at the gas station/convenience store located on the edge of town. What competitive situation is Jameson's Grocery experiencing?Competitive Situation:Explanation:
QUESTION 10
Mary is the only one in town who can make red velvet cupcakes. Each cupcake costs her $4 to make (i.e. her marginal cost is constant
at $4 per cupcake). Currently, Mary charges $4.50 for a cupcake. Below is the table of potential prices she could charge and the
corresponding quantities.
Price
($/cupcake)
6.50
6.00
5.50
5.00
4.50
4.00
Quantity
(cupcakes)
30
42
56
72
92
105
Answer the following questions:
a. What is Mary's marginal revenue when the price is $4.50 per cupcake? Answer to the nearest two decimal places. $
per cupcake.
b. At a price of $4.50 per cupcake, should Mary decrease or increase the number of cupcakes sold to maximise profit?
Type D for Decrease or I for Increase.
c. Calculate Mary's profit-maximising quantity of cupcakes to sell. Answer to the nearest whole number (with no decimal places).
cupcakes.
Suppose you manage a large company’s marketing department and are responsible for deciding whether or not to advertise in the Super Bowl. Your team of analysts estimate that for each advertisement, your firm would generate $6 million in additional revenue for the company. It cost $7 million to run a 30-second advertisement. Therefore, your company would expect to lose $1 million in profit for each advertisement.
Explain why it could still be worthwhile to purchase an advertisement, even though you know in advancethat your company would lose $1.5 million in profit
Chapter 7 Solutions
Principles of Economics (12th Edition)
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