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    Price Elasticities - Popcorn

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    Economists estimate price elasticities more precisely using average price and quantity to computer percentage changes. Thus,

    Using this formula, compute E for a popcorn price increase from 15 cents to 25 cents per ounce (Figure 4.5 on page 85).
    Problem 4
    Supply Decisions and Costs.
    a. Complete the following table.
    Rate of Output Total Cost Marginal Cost Average Cost
    0 $100
    1 $110
    2 $130
    3 $165
    4 $220
    5 $300

    b. What is the value of fixed cost?
    c. On a graph, depict marginal cost and average total cost making sure to label both cost curves on the graph. (Hint #1: You will need to calculate the columns of MC as is done on page 105 and ATC curves on page 103). (Hint #2: The total cost, total total fixed and total variable cost curves are much larger than the MC and ATC curves and do not belong on the same graph).

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    Solution Preview

    The response addresses the query posted in 247 words with APA References

    //The following calculation is based upon price elasticity of demand which is derived by formula based on quantity and price of a commodity. In the calculations below, the price elasticity of popcorn has been depicted that calculated on the basis of the current and previous quantity demanded and current and previous price of commodity.//

    Ans1. The basic formula for elasticity of demand is (Mankiw, ...

    Solution Summary

    The solution addresses the query posted in 247 words with APA References, calculations and graphs