Q7 (2pt). Suppose that the firm currently charges $2. Using the best estimated price-response function in Q6, calculate the price elasticity of demand at the $2 price. (Hint: you can consider a scenario where the store increases the price to $2.01.) Find the most appropriate suggestion based on the price elasticity of demand. (A) The firm should increase its price because the price elasticity is greater than -1. (B) The firm should decrease its price because the price elasticity is greater than -1. (C) The firm should increase its price because the price elasticity is lower than -1. (D) The firm should decrease its price because the price elasticity is lower than -1. Q8 (3pt). Suppose that the variable costs are $0.33/unit, and the fixed costs are $50. Using the best estimated price-response function in Q6, find the optimal price that maximizes the profits. Then, what is the maximum profits? (A) $25 (B) $30 (C) $35 (D) $40