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The Inquiry Club at Jefferson University has compiled a book that exposes the private lives of many of the professors on campus. Economics majors in the club estimate that total revenue from sales of the book is given by the equation:
TR =120Q - 0.1Q3
a. Over what output range is demand elastic?
b. Initially, the price is set at $71.60. To maximize total revenue, should the price be increased or decreased? Explain.
The arc advertising elasticity is 1.5 as advertising expenditure increase from $10 to $12 million. If demand is 50 at an advertising expenditure of $12 million, what will demand be at an advertising expenditure of $10 million?
The price of oil is $30 per barrel and the price elasticity is constant and equal to -0.5. An oil embargo reduces the quantity available by 20 percent. Use the arc elasticity formula to calculate the percentage increase in the price of oil.
Sailright Inc. manufactures and sells sailboards. Management believes that the price elasticity of demand is -3.0. Currently, boards are priced at $500 and the quantity demanded is 10,000 per year,
a. If the price is increased to $600, how many sailboards will the company be able to sell each year?
b. How much will total revenue change as a result of the price increase?
A furniture manufacturer can sell dining-room tables for $70 apiece. The manufacture‘s total cost consists of a fixed overhead of $8,000 plus production costs of $30 per table.
a. How many tables must be the manufacturer sell to break even?
b. How many tables must the manufacturer sell to make a profit of $6,000?
c. What will the manufacturer’s profit or loss if 150 tables are sold?
Acme Tobacco is currently selling 5,000 pounds of pipe tobacco per year. Due to competitive pressures, the average price of a pipe declines from $15 to $12. As a result, the demand for Acme pipe tobacco increase to 6,000 pounds per year.
a. What is the cross elasticity of demand for pipes and pipe tobacco?
b. Assuming that the cross elasticity does not change, at what price of pipes would the demand for pipe tobacco be 3,000 pounds per year? Use $15 as the initial price of a pipe.
Acme Tobacco is currently selling 5,000 pounds of pipe tobacco per year. Due to competitive pressures, the average price of a pipe declines from $15 to $12. As a result, the demand for Acme pipe tobacco increase to 6,000 pounds per year.
a. What is the cross elasticity of demand for pipes and pipe tobacco?
b. Assuming that the cross elasticity does not change, at what price of pipes would the demand for pipe tobacco be 3,000 pounds per year? Use $15 as the initial price of a pipe.
Using the demand function, 12-P, and the supply function, 9+0.5P, for coffee,
Determine the equilibrium price and quantity of coffee if Y=$55, ps=0.20, and pc=$5.
Draw the demand and supply curves and illustrate this equilibrium in a diagram.
Consider the arguments for restricting trade.
a. Imagine that you are a lobbyist for timber, an
established industry suffering from low-priced foreign competition, and you are trying to get Congress to pass trade restrictions. Which two
or three of the five arguments discussed in the chapter do you think would be most persuasive to the average member of Congress? Explain your reasoning.
Difference between pareto efficiency and pareto Improvement with the help of Edgeworth box diagram
