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    Cost Schedules & Elasticity

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    9. Suppose that the firm's cost function is given in the following schedule (where Q is the level of output).
    Output
    Q (units) Total Cost
    0 7
    1 25
    2 37
    3 45
    4 50
    5 53
    6 58
    7 66
    8 78
    9 96
    10 124

    Determine the:

    (a) Marginal cost schedule
    (b) Total cost schedule

    11. The British Automobile Company is introducing a brand new model called the "London Special." Using the latest forecasting techniques, BAC economists have developed the following demand function for the "London Special":
    (Solve using either point or arc elasticity. Consider solving for demand in the two possible price levels. Is this an elastic or inelastic product: do you have pricing power?)

    QD = 1,200,000 - 40P

    What is the point price elasticity of demand at prices of:
    $8,000
    $10,000

    12. Given the following demand function:
    Q = 2.0 P1.33 Y2.0 A0.50

    (What is the Advertising Elasticity of Demand? Does advertising work to increase demand?)

    Where
    Q = quantity demanded (thousands of units)
    P = price ($/unit)
    Y = disposable income per capita ($ thousand)
    A = advertising expenditures ($ thousand)

    Determine the following when P = $2/unit, Y = $8 (i.e., $8000), and A = $25 (i.e., $25,000)

    a. Price elasticity of demand

    b. The approximate percentage increase in demand if disposable income percentage increases by 3%.
    c. The approximate percentage increase in demand if advertising expenditures are increased by 5 percent.

    13. Suppose that the firm's Production Data is given in the following schedule (where Q is the level of output).
    Workers Output
    Q (units)
    0 0
    1 600
    2 1000
    3 1290
    4 1480
    5 1600
    6 1680

    If P=$50 and 2=$14500, how many workers should the firm hire to maximize profits?

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    Solution Summary

    These 3 economics questions cover marginal and total cost schedules, point price and advertising elasticity of demand and profit maximization hiring in an attached 3 page Word document.

    $2.19