Power Brokers, Inc., a discount brokerage firm, is contemplating opening a new regional office in Providence, Rhode Island. An accounting cost analysis of monthly operating costs at a dozen of its regional outlets reveals average fixed costs of $4,500 per month and average variable costs of:
AVC=$59-$0.006Q
Where AVC is average variable cost in dollars and Q is output measured by number of stock and bond trades. A typical stock or bond trade results in $100 of gross commission income, with PBI paying 35% to its sales representative.
A. Estimate the trade volume necessary for PBI to reach a target return of $7,500 per month for a typical office.
B. Estimate and interpret the elasticity of cost with respect to output at the trade volume found in part A.

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A. Estimate the trade volume necessary for PBI to reach a target return of $7,500 per month for a typical office.

For the target return of 7,500 per month, the company has to generate enough revenue to cover fixed costs and the target return.
Fixed costs = 4500 + ...

Solution Summary

The solution discusses each economics question presented. All needed calculations are also included.

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9. What is the basic C-V-P equation? What is a more detailed version of this equation?
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11. How much will profits increase for every unit sold over the break-even point?
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2. Suppose the total cost equation for a competitive firm is given by:
TC=1,000+ 10Q -2Q^2 + 0.5Q^3
(A) At what output is the average vari

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Use Are formula elasticity of demand.

Please assist with all parts. Thank you!!!
Palm Products Company has collected data on its average variable costs of production for the past 12 months. The costs have been adjusted for inflation by deflating with an appropriate price index. The AVC and associated output data are presented below:
obs Q AVC obs Q A

Using the following demand schedule, calculate total revenue, marginal revenue and own-price elasticity of demand. Then show the relation among marginal revenue, price and elasticity of demand.
Quantity Marginal Elasticity
Price Demanded Revenue Of Demand
$60 8
50 16
40 24
30

The Dijon Company's total variable cost function is:
TVC = 50Q -10Q^2 + Q^3
where Q is the number of units of output produced.
a. What is the output level where marginal cost is at minimum?
b. What is output level where average variable cost is a minimum?
c. What is the value of average va

Royersford Knitting Mills, Ltd., sells a line of women's knit underwear.
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Answers the questions
Question 1
When a government wants to increase tax revenue, they will often increase the sales tax on gasoline. Using price elasticity of demand, explain why the tax would be placed on gasoline rather than, say, yachts. What might be the long run effect of raising the price of gas?
Question 2
Th