Microeconomics (7th Edition)
7th Edition
ISBN: 9780134737508
Author: R. Glenn Hubbard, Anthony Patrick O'Brien
Publisher: PEARSON
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Chapter 14, Problem 14.2.16PA
To determine
Price leadership of airlines.
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1.2.
Suppose the market demand equation for Cold Stone Creamery's Ice-cream (CS) in UAE
is given by:
Qés = 2000 – 400Pcs + 0. 51+ 150P BR
while the UAE market supply equation for Cold Stone Creamery's Ice-cream is given by:
Qès = -516 + 300PCS
60W
where Qcs is quantity of text-books, Pcs is the price of Cold Stone Creamery's Ice-cream, I is
household income, W is wage rate paid to Cold Stone Creamery's workers, and PBR the price
of Baskin-Robbins's Ice-cream.
Assume that: I = AED2,000; W = AED20; PBR = AED2.
Calculate the equilibrium price and quantity in this market.
а.
b. What is the Price elasticity of demand for Cold Stone Creamery's Ice-cream at the
equilibrium price and quantity? Hint: Use your answer in "a".
c. Is demand for Cold Stone Creamery's Ice-cream elastic or inelastic? Why? Hint: Use your
answer in "b".
d. Given your answer in part c and the aim is to maximize profit, would you recommend Cold
Stone Creamery to increase its price? Why?
e. Are Cold Stone Creamery's…
Your task is to show what the profit of this firm might look like using a key economics diagram.
To make graphing easier, we will consider the price of the Ozempic drug for the middle-income
country Bangladesh, which is $38 (assumed the profit-maximising price).
For this task, you will be required to illustrate and explain to a typical first-year undergrad student
who has no economics background the profit the firm makes at $38 per month, and what has
happened to profit (producer surplus), markup, consumer surplus and the output if the price was
reduced from $38 to $10 per month.
The BCY Corporation provides accounting services to a wide variety of customers, most ofwhom have had a business association with BCY for more than five years.BCY's demand is: P = 24,000 – 20Q, and BCY's marginal cost of service is: MC = 40Q.a. If BCY charges a uniform price for a unit of accounting service, Q, what price must itcharge per unit, and how many units must it produce per time period in order to maximizeprofit? Calculate the consumer surplus.b. If BCY could enforce first-degree price discrimination, what would be the lowest pricethat it would charge and how many units would it produce per time period?c. With perfect price discrimination and ignoring any fixed cost, what is total profit andwhat is the amount of consumer surplus?
Chapter 14 Solutions
Microeconomics (7th Edition)
Ch. 14 - Prob. 14.1.1RQCh. 14 - Prob. 14.1.2RQCh. 14 - Prob. 14.1.3RQCh. 14 - Prob. 14.1.4PACh. 14 - Prob. 14.1.5PACh. 14 - Prob. 14.1.6PACh. 14 - Prob. 14.1.7PACh. 14 - Prob. 14.1.8PACh. 14 - Prob. 14.1.9PACh. 14 - Prob. 14.1.10PA
Ch. 14 - Prob. 14.2.1RQCh. 14 - Prob. 14.2.2RQCh. 14 - Prob. 14.2.3RQCh. 14 - Prob. 14.2.4RQCh. 14 - Prob. 14.2.5PACh. 14 - Prob. 14.2.6PACh. 14 - Prob. 14.2.7PACh. 14 - Prob. 14.2.8PACh. 14 - Prob. 14.2.9PACh. 14 - Prob. 14.2.10PACh. 14 - Prob. 14.2.11PACh. 14 - Prob. 14.2.12PACh. 14 - Prob. 14.2.13PACh. 14 - Prob. 14.2.14PACh. 14 - Prob. 14.2.15PACh. 14 - Prob. 14.2.16PACh. 14 - Prob. 14.2.17PACh. 14 - Prob. 14.2.18PACh. 14 - Prob. 14.3.1RQCh. 14 - Prob. 14.3.2RQCh. 14 - Prob. 14.3.3PACh. 14 - Prob. 14.3.4PACh. 14 - Prob. 14.3.5PACh. 14 - Prob. 14.3.6PACh. 14 - Prob. 14.4.1RQCh. 14 - Prob. 14.4.2RQCh. 14 - Prob. 14.4.3PACh. 14 - Prob. 14.4.4PACh. 14 - Prob. 14.4.5PACh. 14 - Prob. 14.4.6PACh. 14 - Prob. 14.4.7PACh. 14 - Prob. 14.4.8PACh. 14 - Prob. 14.2CTECh. 14 - Prob. 14.3CTE
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