1. George has been selling 5,000 T-shirts per month for $8.50.When he increased the price to $9.50 he sold only 4,000 T-shirts.Using the midpoint formula, the estimated value of demand elasticity is ______
2. If the marginal cost is $4 per T-shirt, George'sinitial mark-up (at the price of $8.50) is____
3. If the marginal cost is $4 per T-shirt, George's desired mark-up (using the estimated elasticity from problem #1) is____
4. If demand for Nike running shoes is inelastic, should Nike raise or lower prices? Options: A. Lower prices B. Cannot possibly tell due to lack of information C. Raise prices
5. Assume that a product with an elasticity of |e|=2 is selling for $10, and that this is the optimal (i.e. profit maximizing) price.This implies that the Marginal Cost is___
6. Assume that an end-of-aisle promotion changes the price elasticity of the good in the previous problem from -2 to -4.If the MC=$5, what is the profit-maximizing promotional price associated with the new elasticity of |e|=4?
7. The variety of Riverside Ranger logo T-shirts includes 12 different designs.Setup between designs takes one hour (and $18,000) and, after setting up, you can produce 1,000 units of a particular design per hour (at a cost of $8,000).This production exhibits (Scale economies or scope economies)