1. An end-of-aisle price promotion changes the price elasticity of a good from 4 to 5. Suppose the normal price is $48, which equates marginal revenue with marginal cost at the initial elasticity of -4.

What should the promotional price be when the elasticity changes to -5? (Hint: In other words, what price will equate marginal revenue and marginal cost?)

2. A business incurs the following costs:

	Labor: $180/unit
	Materials: $40/unit
	Rent: $250,000/month

Assume the firm produces 2 million units per month.

The total variable cost, per month, is

million.

The total fixed cost, per month, is

million.

The total cost is

million.