! Stonebuilt Concrete produces a specialty cement used in construction of roads. Stonebuilt is a price-setting firm and estimates the demand for its cement by thestate department of transportation using a demand function in the nonlinear form:Q = a pb M pdrwhere Q= yards of cement demanded monthly, P= the price of Stonebuilt's cement per yard, M= state tax revenues per capita, and PR = the price of asphalt peryard. The manager at Stonebuilt transforms the nonlinear relation into a linear relation for estimation. The estimation results are presented below:F-RATIO84.872STANDARDP-VALUE ON FDEPENDENT VARIABLE: LNQ R-SQUAREOBSERVATIONS: 640.80930.0001PARAMETERVARIABLEESTIMATEERRORT-RATIOP-VALUEINTERCEPTLNP2.04-2.163.380.04610.03570.00140.04398.204.01-3.540.642870.78541.64LNM0.19LNPR0.382.07If the price of asphalt (PR) decreases 15%, the estimated quantity of cement demanded will:Multiple Choiceincrease 5.2%.increase 11.8%.increase 1.18%.decrease 11.8%.decrease 5.2%.

Demand function that non linear The slope of the demand curve (P/Q) fluctuates along the demand…

Answered: Stonebuilt Concrete produces a…

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter3: Demand Analysis

Section: Chapter Questions

Problem 10E

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The economic analysis division of Mapco Enterprises has estimated the demand function for its line of weed trimmers as QD=18,000+0.4N350PM+90Ps where N=numberofnewhomescompletedintheprimarymarketarea PM=priceoftheMapcotrimmerPS=priceofitscompetitorsSurefiretrimmer In 2010, 15,000 new homes are expected to be completed in the primary market area. Mapco plans to charge $50 for its trimmer. The Surefire trimmer is expected to sell for $55. What sales are forecasted for 2010 under these conditions? If its competitor cuts the price of the Surefire trimmer to $50, what effect will this have on Mapcos sales? What effect would a 30 percent reduction in the number of new homes completed have on Mapcos sales (ignore the impact of the price cut of the Surefire trimmer)?
For each of the determinants of demand in Equation 2.1, identify an example illustrating the effect on the demand for hybrid gasoline-electric vehicles such as the Toyota Prius. Then do the same for each of the determinants of supply in Equation 2.2. In each instance, would equilibrium market price increase or decrease? Consider substitutes such as plug-in hybrids, the Nissan Leaf and Chevy Volt, and complements such as gasoline and lithium ion laptop computer batteries.
The price elasticity of demand for air travel differs radically from first-class (1.3) to unrestricted coach (1.4) to restricted discount coach (1.9). What do these elasticities mean for optimal prices (fares) on a cross-country trip with incremental variable costs (marginal costs) equal to $120?
If automobiles and gasoline are complements, then their cross-elasticity coefficient is a. strictly greater than 1. b. positive. c. equal to zero. d. negative.
An economic consultant for Gumbcorp. recently provided the firm’s marketing manager with this estimate of the demand function for the firm’s product: Qxd=12,000 -3Px + 4Py - 1M + 2Ax where Qxd represents the amount consumed of good X, Px is the price of good X, is the price of good Y, M is income, and Ax represents the amount of advertising spent on good X. Suppose good X sells for $200 per unit, good Y sells for $15 per unit, the company utilizes 2,000 units of advertising, and consumer income is $10,000. How much of good X do consumers purchase? Are goods X and Y substitutes or complements? Is good X a normal or an inferior good
Using regression analysis on data from a field experiment, the demand curve for a product is estimated to be QXd = 1,200 − 3PX − 0.1PZ where Pz = $300. a. What is the own price elasticity of demand when Px = $140? Is demand elastic or inelastic at this price? What would happen to the firm’s revenue if it decided to charge a price below $140?Enter your response rounded to two decimal places. Own price elasticity: Demand is: . If the firm prices below $140, revenue will:
The Potomac Range Corporation manufactures a line of microwave ovens costing $500 each. Its sales have averaged about 6,000 units per month during the past year. In August, Potomac's closest competitor, Spring City Stove Works, cut its price for a closely competitive model from $600 to $545. Potomac noticed that its sales volume declined to 4,500 units per month after Spring City announced its price cut. What is the arc cross elasticity of demand between Potomac's oven and the competitive Spring City model? 1.5 –1.5 0 3.0 If Potomac knows that the arc price elasticity of demand for its ovens is −1.0, what price would Potomac have to charge to sell the same number of units it did before the Spring City price cut? $375 $450 $429 $667
The Potomac Range Corporation manufactures a line of microwave ovens costing $500 each. Its sales have averaged about 6,000 units per month during the past year. In August, Potomac’s closest competitor, Spring City Stove Works, cut its price for a closely competitive model from $600 to $450. Potomac noticed that its sales volume declined to 4,500 units per month after Spring City announced its price cut. a. What is the arc cross elasticity of demand between Potomac’s oven and the competitive Spring City model? b. Would you say that these two firms are very close competitors? What other factors could have influenced the observed relationship? c. If Potomac knows that the arc price elasticity of demand for its ovens is −3.0, what price would Potomac have to charge to sell the same number of units it did before the Spring City price cut?
After a careful statistical analysis, the Chidester Company concludes the demand function for its product is Q = 500 - 3P + 2Pr + 0.1I where Q is the quantity demanded of its product, P is the price of its product, Pr is the price of its rival’s product, and I is per capita disposable income (in dollars). At present, P = $10, Pr = $20, and I = $6,000. What is the price elasticity of demand for the firm’s product? a. -0.0291 b. -0.027 c. -0541 d. -.270
After a careful statistical analysis, the Chidester Company concludes the demand function for its product is Q = 500 - 3P + 2Pr + 0.1I where Q is the quantity demanded of its product, P is the price of its product, Pr is the price of its rival’s product, and I is per capita disposable income (in dollars). At present, P = $10, Pr = $20, and I = $6,000. What is the cross- price elasticity of demand between its product and its rival’s product? a. 0.0388 b. 0.0721 c. 0.0360 d. -0.0360
S&S Manufacturing Co. supplies automotive parts in three outlets in Selangor. The inverse demand equations faced by each outlet are as follows: Outlet 1: P = 150 – 2.50 Q1 Outlet 2: P = 200 – 8.40 Q2 Outlet 3: P = 450 – 0.75 Q3 a. If the firm charges RM100 per unit, determine the quantity demanded by each outlet. b. Given the price, compute the own price elasticity for each outlet and identify which outlet is the most responsive to price change. Why? c. If S&S Manufacturing Co. plans to increase the price by 10 percent, do you think the Company is making a right decision? Explain your answer.
Can you help with parts c,d, and e please? The estimated daily demand for river corssings on a proposed new bridge is: Qd = 100,000 - 20,000P where Qd is the quantity demanded measured in number of daily crossings and P is the price(toll) per crossing in dollars. Engineers estimate that constructing the new bridge will result in a fixed cost of $1.2 billion or $120,000 per day over the life of the bridge. Once constructed, there are no marginal costs and variable costs associated with the bridge's use. Based upon the above information, answer the following questions: a. If a private company were to build the bridge, what would be the profit-maximizing number of daily crossings? b. What price per crossing(toll) would the profit-maximizing company establish? c. What would be the socially optimal number of daily crossings? d. What deadweight loss would exist given your answers to part (a) and (b)? e. Would a profit-maximizing company build the bridge?

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