Homework Help is Here – Start Your Trial Now!
Business
Economics
3. Elasticities across the two locations A. Calculate the point price elasticity of demand at the optimal price for Q1 (and quantity from Q2) in Laredo B. Calculate the point price elasticity of demand at the optimal price for Q1 (and quantity from Q2) in San Antonio

3. Elasticities across the two locations A. Calculate the point price elasticity of demand at the optimal price for Q1 (and quantity from Q2) in Laredo B. Calculate the point price elasticity of demand at the optimal price for Q1 (and quantity from Q2) in San Antonio

Microeconomics
Microeconomics
13th Edition
ISBN:9781337617406
Author:Roger A. Arnold
Publisher:Roger A. Arnold
Chapter12: Government And Product Markets: Antitrust And Regulation
Section12.2: Regulation
Problem 1ST
See similar textbooks
icon
Related questions
Question

Given

Question #1

  1. Cost function C= 3000+6Q
  2. Q = 4400 - 200Q - This is the demand function
  3. Q= 1600 P = 14
  4. Profit= 22400-12600 = 9800

Question #2 

  1. Q=$480
  2. Q=$1120

Please answer Question #3 (A-E)

3. Elasticities across the two locations A. Calculate the point price elasticity of demand at the optimal price for Q1 (and quantity from Q2) in Laredo B. Calculate the point price elasticity of demand at the optimal price for Q1 (and quantity from Q2) in San Antonio C. Assuming that your marginal costs are $6, are you charging more, less, or exactly the optimal price in Laredo Hint: Calculate markup on price (Lerner's index) and compare it to 1 Ed from earlier question D. Assuming that your marginal costs are $6, are you charging more, less, or exactly the optimal price in San Antonio Hint: Calculate markup on price (Lerner's index) and compare to 1 Ed - from earlier question E. Based on your analysis, describe how you should adjust prices in Laredo and San Antonio
Transcribed Image Text:3. Elasticities across the two locations A. Calculate the point price elasticity of demand at the optimal price for Q1 (and quantity from Q2) in Laredo B. Calculate the point price elasticity of demand at the optimal price for Q1 (and quantity from Q2) in San Antonio C. Assuming that your marginal costs are $6, are you charging more, less, or exactly the optimal price in Laredo Hint: Calculate markup on price (Lerner's index) and compare it to 1 Ed from earlier question D. Assuming that your marginal costs are $6, are you charging more, less, or exactly the optimal price in San Antonio Hint: Calculate markup on price (Lerner's index) and compare to 1 Ed - from earlier question E. Based on your analysis, describe how you should adjust prices in Laredo and San Antonio
(Profit Maximization with no price discrimination You are running a (small) chain of gourmet burger joints with two locations (San Antonio and Laredo) You have been charging $10 for your burger meal (fries, burger and soft drink). Across both locations, you sell 2400 meals per week at this price. When you raised the price to $13 for the burger meal, your sales across the two locations fell to 1800 meals per week. For your costs, you have fixed costs of $3000 per week across the two locations. In addition, it costs you six dollars per burger in variable costs (ingredients, labor etc.) 1. A. What is your combined cost function across the two locations B. Using the two prices above, estimate your combined demand function across the two locations C. Using the combined demand function and cost function calculated above, calculate the profit maximizing price and quantity D. What are your (combined) weekly profits across the two locations? E. 2. Demand across the two locations After taking your managerial economics class, you realize that you can probably raise your profits by price discriminating by charging different prices in the two locations. You then breakdown sales across the two locations. In Laredo: You sold 960 burger meals per week at $10 and 600 meals at $13. In San Antonio: You sold 1440 meals per week at $10 and 1200 meals at $13 A. Using the two prices above, estimate your demand function in Laredo. What would demand be at the optimal price from Q1 B. Using the two prices above, estimate your demand function in San Antonio. What would demand be at the optimal price from Q1?
Transcribed Image Text:(Profit Maximization with no price discrimination You are running a (small) chain of gourmet burger joints with two locations (San Antonio and Laredo) You have been charging $10 for your burger meal (fries, burger and soft drink). Across both locations, you sell 2400 meals per week at this price. When you raised the price to $13 for the burger meal, your sales across the two locations fell to 1800 meals per week. For your costs, you have fixed costs of $3000 per week across the two locations. In addition, it costs you six dollars per burger in variable costs (ingredients, labor etc.) 1. A. What is your combined cost function across the two locations B. Using the two prices above, estimate your combined demand function across the two locations C. Using the combined demand function and cost function calculated above, calculate the profit maximizing price and quantity D. What are your (combined) weekly profits across the two locations? E. 2. Demand across the two locations After taking your managerial economics class, you realize that you can probably raise your profits by price discriminating by charging different prices in the two locations. You then breakdown sales across the two locations. In Laredo: You sold 960 burger meals per week at $10 and 600 meals at $13. In San Antonio: You sold 1440 meals per week at $10 and 1200 meals at $13 A. Using the two prices above, estimate your demand function in Laredo. What would demand be at the optimal price from Q1 B. Using the two prices above, estimate your demand function in San Antonio. What would demand be at the optimal price from Q1?
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 3 steps

SEE SOLUTIONCheck out a sample Q&A here
Blurred answer
Knowledge Booster
Elasticity of demand
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
Microeconomics
Microeconomics
Economics
ISBN:
9781337617406
Author:
Roger A. Arnold
Publisher:
Cengage Learning
Economics (MindTap Course List)
Economics (MindTap Course List)
Economics
ISBN:
9781337617383
Author:
Roger A. Arnold
Publisher:
Cengage Learning
SEE MORE TEXTBOOKS