Economics: Principles & Policy
14th Edition
ISBN: 9781337696326
Author: William J. Baumol; Alan S. Blinder; John L. Solow
Publisher: Cengage Learning
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Question
Chapter 13, Problem 5DQ
To determine
The actions taken to increase the compact-car market.
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In advertising, a business is not only making consumers aware of the existence of the product and its positive features but is purposely trying to persuade consumers to purchase the product. As a piece of economics which of the following best characterises what advertisers are trying to do?
(a) Shift the demand curve to the right and make it more income elastic;
(b) Shift the demand curve to the right and make it less income elastic;
(c) Shift the demand curve to the right and make it less price elastic;
(d) Shift the demand curve to the right and make it more price elastic.
Question 5: Jimmy has a room that overlooks, from some distance, a major league baseball stadium. He decides to
rent a telescope for $50 a week and charge his friends and classmates to use it to peep at the game for 30 seconds. He
can act as a monopolist for renting out "peeps". For each person who takes a 30 second peep, it costs Jimmy $.20 to
clean the eyepiece. Jimmy believes he has the following demand for his service:
Price of
a Peep
$1.20
Quantity
of peeps demanded
1.00
90
100
150
200
250
300
70
60
50
350
40
30
400
450
20
10
500
550
a) For each price, calculate the total revenue from selling peeps and themarginal revenue per
peep.
Price
Quantity
TR
MR
$1.20
100
90
100
150
200
70
250
60
300
350
50
40
30
400
450
20
500
10
550
b) At what quantity will Jimmy's profit be maximized? What price will he charge? What will his total profit be?
c) Jimmy's landlady complains about all the visitors coming into the building and tells Jimmy to stop selling
peeps. Jimmy discovers, though, if he…
At a price of $8 per unit, Gadgets Incorporated is willing to supply 19,000 gadgets, while United Gadgets is willing to supply 16,000 gadgets. If the price were to rise to $10 per unit, their respective quantities supplied would rise to 28,000 and 22,000. If these are the only two firms supplying gadgets, what is the elasticity of supply in the market for gadgets?
Multiple Choice
1.59
1.4
2.22
0.63
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