A firm with pricing power (i.e. a price-maker) estimates that the elasticity of demand for its product is __A= -3.50___. To maximize profits by what percentage above cost should it markup its price?

devrat

The Total Revenue is decreasing when the demand is inelastic and the price is increased slightly. True O False

Question 1 Sal's Streaming Company streams TV shows to subscribers in the US and Canada. Demand is Qus 50 (1/3)Pus - QCA 80 (2/3)P CA = - where Q's are in thousands of subscriptions per year and P's are the subscription prices per year. The cost of providing Q units of service is given by TC = 1000 + 30Q, where Q = Qus+ QCA (a) What are the profit-maximizing prices and quantities for the US and Canadian markets? (b) As a consequence of a new VPN service that Facebook has developed, subscribers in Canada are now able to get the US streams and vice versa, so Sal can charge only a single price. What is the profit-maximizing single price that he should charge? (c) In which situation is Sal better off? In terms of consumers' surplus which situation do people in Canada prefer and which do people in the US prefer? Why?