Managerial Economics & Business Strategy (Mcgraw-hill Series Economics)
9th Edition
ISBN: 9781259290619
Author: Michael Baye, Jeff Prince
Publisher: McGraw-Hill Education
expand_more
expand_more
format_list_bulleted
Videos
Textbook Question
Chapter 7, Problem 3CACQ
Suppose the own price elasticity of market
Expert Solution & Answer
Trending nowThis is a popular solution!
Students have asked these similar questions
own price elasticity of market demand for retail gasoline is -0.8,the Rothschild index is 0.5, and a typical gasoline retailer enjoys sales of$1.5 million annually. What is the price elasticity of demand for a representative gasoline retailer's product?
You own a bakery and shop that makes and sells gourmet doggie treats. You have done
market research and you know with certainty that your product is a normal good, not an
inferior good. The current demand function for your gourmet doggie treats is:
QD = 480 -6*P
which of course means the equation for your current demand curve is:
P = 80 -(1/6)*Q
You are opening a new shop in a new part of town, and you know that incomes in that part of
town are much lower than incomes are where your shop is now. Which of the following is
most likely the demand curve in your new shop?
Multiple Choice
O
P=68- (1/6)*Q
P = 102 - (1/6)*Q
P=92-(1/6)*Q
P = 88 - (1/6)*Q
In her spare time, your colleague is selling hand-carved wooden boxes on
Etsy. The boxes are currently priced at $30/box. Your colleague is not
happy with their current revenue stream and asks for your advice. You
estimate that demand for your colleague's hand-carved wooden boxes is:
Q = 800-20P. If your colleague is looking to maximize revenue, how
should they price their wooden boxes?
Keep prices at $30/box
Lower prices to $20/box
Raise price to $40/box
Lower price to $25/box
Raise prices to $35/box
Chapter 7 Solutions
Managerial Economics & Business Strategy (Mcgraw-hill Series Economics)
Knowledge Booster
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
- Suppose Samsunk sells her tablet computers at a price of $3,000. Estimates show that the manufacturing cost of each tablet computer is constant at $900. Calculate the Lerner Index of Samsunk on her tablet computers and the implied demand elasticity for her tablet computers.arrow_forwardIf a company successfully advertises its product, do we expect the price elasticity of demand for this firm’s perceived demand curve to increase, decrease, or remain the same?arrow_forwardSuppose that BMW can produce any quantity of cars at a constant marginal cost equal to$50 and a fixed cost of $22,500. You are asked to advise the CEO as to what prices andquantities BMW should set for sales in Europe and in the United States to maximize its profits.The demand for BMWs in each market is given by:QE = 8,000 – 80PE and QU = 4,000 – 20 PU,where the subscript E denotes Europe, the subscript U denotes the United States. Assume thatBMW can restrict U.S. sales to authorized BMW dealers only. Support your answersgraphically as well.a. If, by an international agreement between Europe and United States, BMW wereforced to charge the same price in each market, what would be the quantity sold in eachmarket, the equilibrium price, and the company’s profit?b. Suppose now that Europe and United States signed a new trade package under whichBMW now can charge different prices across the two markets. What quantity of BMWsshould the firm sell in each market, and what should the price be…arrow_forward
- Suppose that BMW can produce any quantity of cars at a constant marginal cost equal to $50 and a fixed cost of $22,500. You are asked to advise the CEO as to what prices and quantities BMW should set for sales in Europe and in the United States to maximize its profits. The demand for BMWS in each market is given by: QE = 8,000 - 80PE and Qu = 4,000 - 20 Pu, where the subscript E denotes Europe, the subscript U denotes the United States. Assume that BMW can restrict U.S. sales to authorized BMW dealers only. Support your answers %3D graphically as well. a. If, by an international agreement between Europe and United States, BMW were forced to charge the same price in each market, what would be the quantity sold in each market, the equilibrium price, and the company's profit? b. Suppose now that Europe and United States signed a new trade package under which BMW now can charge different prices across the two markets. What quantity of BMWS should the firm sell in each market, and what…arrow_forwardSuppose that BMW can produce any quantity of cars at a constant marginal cost equal to $20,000 and a fixed cost of $10 billion. You are asked to advise the CEO as to what prices and quantities BMW should set for sales in Europe and in the United States. The demand for BMWS in each market is given by QE = 4,000,000 – 100PE and Qu = 1,500,000 – 20PU where the subscript E denotes Europe, the subscript U denotes the United States. Assume that BMW can restrict U.S. sales to authorized BMW dealers only. a. What quantity of BMWS should the firm sell in each market, and what should the price be in each market? What should the total profit be? (round dollar amounts to the nearest penny and quantities to the nearest integer) In Europe, the equilibrium quantity is 1000000 cars at an equilibrium price of S 30000 . While in the United States, the equilibrium quantity is 550000 cars at an equilibrium price of $ 47500 . BMW makes a total profit of $ 15125000000 . b. If BMW were forced to charge the…arrow_forwardYou are a division manager at Toyota. If your marketing department estimates that the semiannual demand for the Highlander is Q = 150,000 – 1.5P, what price should you charge in order to maximize revenues from sales of the Highlander?arrow_forward
- Suppose the own price elasticity of market demand for retail gasoline is -0.9, the Rothschild index is 0.6, and atypical gasoline retailer enjoys sales of $1, 200, 000annually. What is the price elasticity of demand for arepresentative gasoline retailer's product? Instruction:Enter your response rounded to two decimal places. Ifentering a negative number, be sure to use thenegative (-) sign.arrow_forwardSuppose that BMW can produce any quantity of cars at a constant marginal cost equal to $20,000 and a fixed cost of $10 billion. You are asked to advise the CEO as to what prices and quantities BMW should set for sales in Europe and in the United States. The demand for BMWs in each market is given by QE = 4,000,000 - 100PE and Qu = 1,500,000 –- 20PU where the subscript E denotes Europe, the subscript U denotes the United States. Assume that BMW can restrict U.S. sales to authorized BMW dealers only. a. What quantity of BMWs should the firm sell in each market, and what should the price be in each market? What should the total profit be? (round dollar amounts to the nearest penny and quantities to the nearest integer) In Europe, the equilibrium quantity is cars at an equilibrium price of $ While in the United States, the equilibrium quantity is cars at an equilibrium price of $ BMW makes a total profit of Sarrow_forwardSuppose you are managing a farming company, which is one of the major producers of Tomato in the State of North Carolina. You have been provided with the following graph which shows the demand curve for the tomatoes that your company is producing. As you can see, there are two known points (X and Y) on a demand curve for tomatoes. According to the “standard" method of computing elasticity (i.e. use the standard formula of percentage change in your computations), the standard-method price elasticity of demand for tomatoes when moving from point X to point Y is approximately Demand 10 20 30 40 50 60 70 80 90 100 QUANTITY (Thousands of pounds of tomatoes)arrow_forward
- Suppose that BMW can produce any quantity of cars at a constant marginal cost equal to $20,00 and a fixed cost of $10 billion. You are asked to advise the CEO as to what prices and quantities BMW should set for sales in Europe and in the United States. The demand for BMWs in each market is given by QE=4,000,000−100PE and QU=1,500,000−20PU where the subscript E denotes Europe, the subscript U denotes the United States. Assume that BMW can restrict U.S. sales to authorized BMW dealers only. a. What quantity of BMWs should the firm sell in each market, and what should the price be in each market? What should the total profit be? (round dollar amounts to the nearest penny and quantities to the nearest integer) In Europe equilibrium quantity is 1,000,000 cars at an equilibrium price of $30,000 In United States equilibrium quantity is 550,000 cars at an equilibrium price of $47,500 BMW makes a total profit of $15.125 billion. I Need help with this part: If BMW were forced…arrow_forwardSuppose that BMW can produce any quantity of cars at a constant marginal cost equal to $20,00 and a fixed cost of $10 billion. You are asked to advise the CEO as to what prices and quantities BMW should set for sales in Europe and in the United States. The demand for BMWs in each market is given by QE=4,000,000−100PE and QU=1,500,000−20PU where the subscript E denotes Europe, the subscript U denotes the United States. Assume that BMW can restrict U.S. sales to authorized BMW dealers only. a. What quantity of BMWs should the firm sell in each market, and what should the price be in each market? What should the total profit be? (round dollar amounts to the nearest penny and quantities to the nearest integer) In Europe equilibrium quantity is 1,000,000 cars at an equilibrium price of $30,000 In United States equilibrium quantity is 550,000 cars at an equilibrium price of $47,500 BMW makes a total profit of $15.125 billion. I Need help with this part: If BMW were forced…arrow_forwardYou are a division manager at Toyota. If your data analytics department estimates that the semiannual demand for the Highlander is P = 150,000 – 1.5Q, what price should you charge in order to maximize revenues from sales of the Highlander?arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Managerial Economics: A Problem Solving ApproachEconomicsISBN:9781337106665Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike ShorPublisher:Cengage Learning
Managerial Economics: A Problem Solving Approach
Economics
ISBN:9781337106665
Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:Cengage Learning
How To Understand Elasticity (Economics); Author: Market Power;https://www.youtube.com/watch?v=1XXhpHJTglg;License: Standard Youtube License