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Exercise II: Elasticity and revenue II (2.6) You should complete Exercise I before starting this exercise. Assume that the demand of chocolate of a local
Exercise II: Elasticity and revenue II (2.6) You should complete Exercise I before starting this exercise. Assume that the demand of chocolate of a local producer is given by q = 9 \\/]_9 in hundreds of kilograms, where p E [0, 81] is the price of a kilogram in USD. 1. Compute the elasticity of the demand as a function of p, and nd where it is elastic, inelastic, and unit-elastic. . Compute the revenue R(p) in USD as a function of p. Careful of units! . Compute R'(25). Give its unit and interpret this quantity. . What is the sign of R'(25)? Considering what you obtained in Question 1, does this make sense? . Now, compute the revenue R(q) in USD as a function of q. Careful of units! . Compute the marginal revenue Rm(q). . Compute Rm (4) Give its unit and interpret this quantity. . Note that q = 4 corresponds to p = 25. Why do we obtain different interpretations in Questions 4 and 7
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