Managerial Economics & Business Strategy (Mcgraw-hill Series Economics)
9th Edition
ISBN: 9781259290619
Author: Michael Baye, Jeff Prince
Publisher: McGraw-Hill Education
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Question
Chapter 8, Problem 10CACQ
(A)
To determine
The firm's marginal revenue as a function of its price is to be ascertained.
(B)
To determine
The profit maximizing price is to be calculated.
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The manager of a local monopoly estimates that the elasticity of demand for its product is equal to -4. The firm’s marginal cost is 25. Express the firm’s marginal revenue as a function of its price then determine the profit-maximizing price.
For a monopoly firm, marginal revenue
when demand is price inelastic.
when demand is price elastic and is
Falling ; rising
Negative ; positive
Rising ; falling
Positive ; negative
The inverse demand curve a monopoly faces is
p=120-2Q.
The firm's cost curve is
C(Q) = 40 +6Q.
What is the profit-maximizing solution?
The profit-maximizing quantity is 28.50. (Round your answer to two decimal places.)
The profit-maximizing price is $63.00. (round your answer to two decimal places.)
What is the firm's economic profit?
The firm earns a profit of $ 1584.50. (round your answer to two decimal places.)
How does your answer change if C(Q)= 100+6Q? The increase in fixed cost
OA. has no effect on the equilibrium quantity, but the equilibrium price increases and profit decreases.
B. causes the firm to increase both the price and quantity, and profit increases.
OC. has no effect on the equilibrium quantity, but the equilibrium price increases and profit increases.
D. has no effect on the equilibrium price and quantity, but profit will decrease.
Chapter 8 Solutions
Managerial Economics & Business Strategy (Mcgraw-hill Series Economics)
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