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You are a manager at Boston Brew'ns, the official microbrewery of the Boston Bruins. Applying what you learned at Cal State East Bay prior to
You are a manager at Boston Brew'ns, the official microbrewery of the Boston Bruins. Applying what you learned at Cal State East Bay prior to moving to the east coast, you have estimated the cost function for brewing beer to be 6\"?) = 2 + Q + $02. Further, you have estimated the elasticity of demand for your signature beer, finding it to be e = 4-. 0. Your firm has some price setting power because you and the other breweries in town offer differentiated products. a} You are currently charging a price of $5 per beer and selling 100 beers. Is this a profit- maximizing price? Explain. Should you increase or decrease the markup? Explain. b] Suppose the owners of the brewery ask for suggestions on how they might increase prots. What are some generic strategies {or specic, if you are feeling creative) that might increase the brewery's market power. Hint: use the Lerner Index and the own-price elasticity of demand as a fra mework
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