Question
Tom's Flower Sales (a firm with significant market power) sells Protea flowers for use at weddings. Over the years, his research suggests that the demand
Tom's Flower Sales (a firm with significant market power) sells Protea flowers for use at weddings. Over the years, his research suggests that the demand for Proteas is = 50 2. He can ethically source Proteas at R4 per Protea. Use this information to answer the following questions. a) Calculate the MRS when Tom sells 5 Proteas. [2] b) Calculate the MRT when Tom sells 5 Proteas. [2] c) Given the information in the first two questions, what should Tom do to maximise profit? Explain your answer clearly. [2] d) Calculate the consumer and producer surplus at Tom's profit-maximising equilibrium price and quantity. Graph this equilibrium, clearly showing the consumer and producer surplus. Make sure you label your diagram and axes correctly. [6
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