5.21. MCL. MCL produces a small toy drone. Based on historical data, demand at two different price levels is estimated as follows: 10, demand is given by q = 35. When p = 11, demand is = = When p given by q = 28. (a) Determine the value of price elasticity of demand. (b) Suppose that unit cost of production is c = 2 (and does not vary with output level). Assuming that the price elasticity of demand is constant, determine the profit-maximizing price. (c) MCL is considering exporting to market M. Suppose that the transportation cost is negligible, so that the cost of serving market M is the same as the cost of serving the domestic market. The price elasticity of demand in market M is estimated to be -3. Determine the profit-maximizing export price.

5.21. MCL. MCL produces a small toy drone. Based on historical data, demand at two different price levels is estimated as follows: 10, demand is given by q = 35. When p = 11, demand is = = When p given by q = 28. (a) Determine the value of price elasticity of demand. (b) Suppose that unit cost of production is c = 2 (and does not vary with output level). Assuming that the price elasticity of demand is constant, determine the profit-maximizing price. (c) MCL is considering exporting to market M. Suppose that the transportation cost is negligible, so that the cost of serving market M is the same as the cost of serving the domestic market. The price elasticity of demand in market M is estimated to be -3. Determine the profit-maximizing export price.

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

Chapter4: Estimating Demand

Section: Chapter Questions

Problem 6E

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