Question
Your firm faces the following demand curve: Q(P)= 3,000-20P Your firm's cost function is: TC(Q)= $50Q Your firm's marginal costs are therefore: MC= $50 A.
Your firm faces the following demand curve: Q(P)= 3,000-20P
Your firm's cost function is: TC(Q)= $50Q
Your firm's marginal costs are therefore: MC= $50
A.
i. Calculate the point price elasticity of demand when the price is $75.
ii. Calculate the markup on price when the price is $75
iii. Based on our rule comparing elasticities and markups is the price too high or too low? EXPLAIN
B.
i. Calculate the point price elasticity of demand when the price is $125.
ii. Calculate the markup on price when the price is $125
iii. Based on our rule comparing elasticities and markups is the price too high or too low? EXPLAIN
C.
i. Calculate the point price elasticity of demand when the price is $100.
ii. Calculate the markup on price when the price is $100
iii. Based on our rule comparing elasticities and markups is the price too high or too low? EXPLAIN
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started
Lectures On Urban Economics
Authors: Jan K Brueckner
1st Edition
0262300311, 9780262300315
