Principles of Economics (12th Edition)
12th Edition
ISBN: 9780134078779
Author: Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher: PEARSON
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Question
Chapter 7, Problem 1.6P
To determine
The profit of Apple.
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6
In 1916, Henry Ford was quoted as saying the following:
"There are men who will pay $360 for a car who would not pay $440. We had in round numbers
500,000 buyers of cars on the $440 basis, and I figure that on the $360 basis we can
increase sales to possibly 800,000 cars for the year - less profit on each car, but more cars,
more employment of labor, and in the end we get all the total profit we ought to make."
If Ford's estimate as correct, what was the price elasticity of demand for his cars?
By how much did total revenue increase?
6
In 1916, Henry Ford was quoted as saying the following:
"There are men who will pay $360 for a car who would not pay $440. We had in round numbers
500,000 buyers of cars on the $440 basis, and I figure that on the $360 basis we can
increase sales to possibly 800,000 cars for the year - less profit on each car, but more cars,
more employment of labor, and in the end we get all the total profit we ought to make."
If Ford's estimate as correct, what was the price elasticity of demand for his cars?
By how much did total revenue increase?
7
Using the data from question 6, above, write the demand curve equation for Henry Ford's
cars.
8
Using the demand curve equation from question 7, build a graphic to sell Ford cars to the
public in 1916.
Briefly explain how the total revenue for a profit-seeking firm is determined.
Chapter 7 Solutions
Principles of Economics (12th Edition)
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- Briefly summarize of pricing strategy of the Apple companyarrow_forwardCalculate Iyana's marginal revenue and marginal cost for the first seven rompers they produce, and plot them on the following graph. Use the blue points (circle symbol) to plot marginal revenue and the orange points (square symbol) to plot marginal cost at each quantity. COSTS AND REVENUE (Dollars per romper) 40 35 30 25 20 15 10 0 0 1 2 3 4 5 6 7 8 QUANTITY (Rompers) Marginal Revenue Marginal Cost ? Iyana's profit is maximized when they produce a total of is $ , an amount rompers. At this quantity, the marginal cost of the final romper they produce than the price received for each romper they sell. At this point, the marginal cost of producing one more romper (the first romper beyond the profit maximizing quantity) is $ , an amount than the price received for each romper they sell. Therefore, Iyana's profit-maximizing quantity occurs at the point of intersection between the Because Iyana is a price taker, the previous condition is equivalent to curves.arrow_forwardSuppose Felix runs a small business that manufactures frying pans. Assume that the market for frying pans is a competitive market, and the market price is $20 per frying pan. The following graph shows Felix's total cost curve. Use the blue points (circle symbol) to plot total revenue and the green points (triangle symbol) to plot profit for frying pans quantities zero through seven (inclusive) that Felix produces. TOTAL COST AND REVENUE (Dollars) 200 175 150 125 100 75 50 25 0 -25 0 1 ● ^ 2 O ☐ A ☐ A 3 4 5 QUANTITY (Frying pans) O ☐ 6 Total Cost ☐ 7 8 o Total Revenue Profit ? image 1 Calculate Felix's marginal revenue and marginal cost for the first seven frying pans he produces, and plot them on the following graph. Use the blue points (circle symbol) to plot marginal revenue and the orange points (square symbol) to plot marginal cost at each quantity.arrow_forward
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