Suppose the demand function is Q=100-P, where Q is the quantity demand and P is the price. Please calculate the price elasticity at P=10 (by comparing it with a pair of price and quantity at P=20). Calculate the change in total revenue which is P times Q moving from P=10 to P=20. Repeat the same exercise for P=70 versus P=80.
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(a) Q0 = 100 - P0 = 100 - 10 = 90, Q1 = 100 - P1 = 100 - 20 = 80
Price Elasticity of demand =|[2(Q1 - Q0)/(Q1 + Q0)] / [2(P1 - P0)/(P1 + P0)]|
= |[2(80 - 90)/(80 + 90)] / ...
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You are the manager of a monopoly, and your demand and cost functions are given by
P=200-2Q and C(Q)=2,000+3Q , respectively.
a. What price-quantity combination maximizes your firm's profits?
b. Calculate the maximum profits
c. Is demand elastic, inelastic, or unit elastic at the profit-maximizing price-quantity combination?
d. What price-quantity combination maximizes revenue?
e. Calculate the maximum revenues.
f. Is demand elastic, inelastic, or unit elastic at the revenue-maximizing price-quantity combination?
You are the manager of a firm that produces a product according to the cost function
C(qi ) = 100 +50qi - 4q i + qi . Determine the short-run supply function if:
a. You operate a perfectly competitive business.
b. You operate a monopoly.
c. You operate a monopolistically competitive business.