Question
Scenario 1 (length: as needed) A cupcake store is located in a mall and is the only cupcake store in that mall. The demand schedule
Scenario 1 (length: as needed)
A cupcake store is located in a mall and is the only cupcake store in that mall. The demand schedule for cupcakes (per dozen) is given in the table below. If the marginal cost to produce a dozen cupcakes is $4 per unit, how many units should the firm produce?
| Price | Quantity Purchased (dozen per day) |
|---|---|
| $12 | 4 |
| $11 | 8 |
| $10 | 12 |
| $9 | 22 |
| $8 | 36 |
| $7 | 70 |
| $6 | 110 |
| $5 | 170 |
| $4 | 350 |
Scenario 1 Questions
- What price should the cupcake store charge?
- If the fixed cost for the firm is $100 per day, how much profit will the firm make in one day?
- What is the price elasticity of demand at the optimal price/quantity combination (use the next lower price level as the second point in your calculation)?
- Is the formula for finding the correct level of output in the middle of page 74 in your text satisfied? (Note there is a typo in the text; the equation should read (P-MC)/P > 1/|e|. )
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Entrepreneurship
Authors: Andrew Zacharakis, William D Bygrave
5th Edition
9781119563099
