Micro

Happy Family Restaurant sells Dumplings (D) and Rolls (R). Each Dumpling costs $2. Customers can buy up to 5 rolls at $1/each, but pay $3/each for more than 5 rolls.

A) Suppose that Giovanna buys 4 Dumplings and 3 Rolls. What is her MRS(D,R)? Explain what this means in words

B) Suppose that Jakina buys 6 Dumplings and 5 rolls. What is her MRS(D,R)? Explain what this means in words

C) True, False, or Uncertain: If customers could buy any number of Rolls at $1 each, Giovanna and Jakina would both increase their consumption of Rolls. Explain. Suppose that Tommy Hilfiger's marginal cost of a jacket is $200 and at one of the firm's shops, total fixed cost is $500 a day. The profit maximizing number of jackets sold in this shop is 30 a day. Then the shops nearby from other retailers start advertising their jackets. The Tommy Hilfiger shop decides to spend $1,000 a day advertising its jackets, and its profit maximizing number of jackets sold jumps to 60 a day.

1. Before advertising: Suppose that the price elasticity of demand is 2. Can you compute the price of a Tommy Hilfiger jacket? And the markup? Please, compute the amount of maximal profits.

2.After advertising: Suppose that the price elasticity of demand equals 6. Can you compute Tommy's economic profit?