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QUESTION 1 Firms A, B, and C were all selling 1,000 cups of coffee per day at $3.50 per cup, but in the following week they all changed their prices. This gave their managers some information about the elasticity of demand in their local market, though they have to be careful to recognize that other factors might also have affected demand. The table below shows the change in sales as a result of their new prices; they made no other changes. Complete the table by calculating the revenue, cost of goods sold (COGS), and gross margin for each firm. Firm Baseline A B с Price per Cup $3.50 $3.00 $4.00 $2.50 Cups Sold 1,000 1,140 830 1,500 Revenue $3,500 $0 $0 $0 COGS @ $0.35 per Cup $350 0 Taking into consideration only these financial results, what should they do? (select option) 0 $0 Gross Margin $3,150 $0 $0 $0 Coffee prices are going up, and Firm B is trying to decide whether to pass on to customers a cost increase of 10¢ per cup-to $0.45 per cup. What will be their new gross margin if they don't pass on the cost increase and demand remains unchanged? $ o What will be their new gross margin if they raise their price from $4.00 to $4.10 and demand decreases by 2%. $0 #

QUESTION 1 Firms A, B, and C were all selling 1,000 cups of coffee per day at $3.50 per cup, but in the following week they all changed their prices. This gave their managers some information about the elasticity of demand in their local market, though they have to be careful to recognize that other factors might also have affected demand. The table below shows the change in sales as a result of their new prices; they made no other changes. Complete the table by calculating the revenue, cost of goods sold (COGS), and gross margin for each firm. Firm Baseline A B с Price per Cup $3.50 $3.00 $4.00 $2.50 Cups Sold 1,000 1,140 830 1,500 Revenue $3,500 $0 $0 $0 COGS @ $0.35 per Cup $350 0 Taking into consideration only these financial results, what should they do? (select option) 0 $0 Gross Margin $3,150 $0 $0 $0 Coffee prices are going up, and Firm B is trying to decide whether to pass on to customers a cost increase of 10¢ per cup-to $0.45 per cup. What will be their new gross margin if they don't pass on the cost increase and demand remains unchanged? $ o What will be their new gross margin if they raise their price from $4.00 to $4.10 and demand decreases by 2%. $0 #

Microeconomics: Private and Public Choice (MindTap Course List)
Microeconomics: Private and Public Choice (MindTap Course List)
16th Edition
ISBN:9781305506893
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Chapter7: Consumer Choice And Elasticity
Section: Chapter Questions
Problem 13CQ: Suppose Erin, the owner-manager of a local hotel projects the following demand for her rooms: a....
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QUESTION 1 Firms A, B, and C were all selling 1,000 cups of coffee per day at $3.50 per cup, but in the following week they all changed their prices. This gave their managers some information about the elasticity of demand in their local market, though they have to be careful to recognize that other factors might also have affected demand. The table below shows the change in sales as a result of their new prices; they made no other changes. Complete the table by calculating the revenue, cost of goods sold (COGS), and gross margin for each firm. Firm Baseline A B C Price per Cup $3.50 $3.00 $4.00 $2.50 Cups Sold 1,000 1,140 830 1,500 Revenue $3,500 $0 0 0 COGS @ $0.35 per Cup $350 $0 $0 $0 Gross Margin $3,150 $0 $0 $0 Coffee prices are going up, and Firm B is trying to decide whether to pass on to customers a cost increase of 10¢ per cup-to $0.45 per cup. What will be their new gross margin if they don't pass on the cost increase and demand remains unchanged? $ 0 What will be their new gross margin if they raise their price from $4.00 to $4.10 and demand decreases by 2%. $0 Taking into consideration only these financial results, what should they do? (select option) If they wanted to increase the price but try to maintain the same number of cups sold what might they consider doing (Ctrl- or Cmd-click to select more than one)?
Transcribed Image Text:QUESTION 1 Firms A, B, and C were all selling 1,000 cups of coffee per day at $3.50 per cup, but in the following week they all changed their prices. This gave their managers some information about the elasticity of demand in their local market, though they have to be careful to recognize that other factors might also have affected demand. The table below shows the change in sales as a result of their new prices; they made no other changes. Complete the table by calculating the revenue, cost of goods sold (COGS), and gross margin for each firm. Firm Baseline A B C Price per Cup $3.50 $3.00 $4.00 $2.50 Cups Sold 1,000 1,140 830 1,500 Revenue $3,500 $0 0 0 COGS @ $0.35 per Cup $350 $0 $0 $0 Gross Margin $3,150 $0 $0 $0 Coffee prices are going up, and Firm B is trying to decide whether to pass on to customers a cost increase of 10¢ per cup-to $0.45 per cup. What will be their new gross margin if they don't pass on the cost increase and demand remains unchanged? $ 0 What will be their new gross margin if they raise their price from $4.00 to $4.10 and demand decreases by 2%. $0 Taking into consideration only these financial results, what should they do? (select option) If they wanted to increase the price but try to maintain the same number of cups sold what might they consider doing (Ctrl- or Cmd-click to select more than one)?
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