Foundations of Economics (8th Edition)
8th Edition
ISBN: 9780134486819
Author: Robin Bade, Michael Parkin
Publisher: PEARSON
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Chapter 16, Problem 2SPPA
To determine
To explain:
The comparison between profit maximizing
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Elixir Spring's mineral water is unique and highly prized.
The firm's total fixed cost is $4,000 a day and its marginal cost is zero.
The table shows the market demand schedule for the firm's water.
Compare Elixir's profit-maximizing price with the marginal cost of producing the profit-maximizing output.
At the profit-maximizing price, is the demand for Elixir's water inelastic or elastic?
Elixir's profit-maximizing price
Elixir's marginal cost.
A. is greater than
B. is less than
C. equals
At the profit-maximizing price, the demand for Elixir's water is
A. inelastic
B. elastic
C. perfectly inelastic
D. unit elastic
E. perfectly elastic
Paulina sells beef in a competitive market where the price is $8 per pound. Her total revenue and total costs are given in the table
below.
Quantity of Total revenue Total cost
beef (lb.)
0
1
2
3
4
($)
0
8
16
24
32
($)
4
8
13
19
27
Profit ($)
0
8
pounds
Marginal
revenue ($)
c. What is the profit-maximizing (or loss-minimizing) quantity?
Marginal Marginal
cost ($) profit ($)
a. Complete the table.
Instructions: Enter your answers as a whole number. If you are entering any negative numbers be sure to include a negative sign (-) in
front of those numbers.
b. At what quantity does marginal revenue equal marginal cost?
pounds
A
3. Johnny Rockabilly has just finished recording his latest CD. His record company's marketing department determines that the demand for the CD is as follows:
Price Number of CDs
$24
10 000
22
20 000
20
20
30 000
18
40 000
16
50 000
14
60 000
The company can produce the CD with no fixed cost and a variable cost of $5 per CD.
a. Find total revenue for quantity equal to 10 000, 20 000, and so on. What is the marginal revenue for each 10 000 increase in the quantity sold?
b. What quantity of CDs would maximize profit? What would be the price? What would be the profit?
c. If you were Johnny's agent, what recording fee would you advise Johnny to demand from the record company? Why?
Chapter 16 Solutions
Foundations of Economics (8th Edition)
Ch. 16 - Prob. 1SPPACh. 16 - Prob. 2SPPACh. 16 - Prob. 3SPPACh. 16 - Prob. 4SPPACh. 16 - Prob. 5SPPACh. 16 - Prob. 6SPPACh. 16 - Prob. 7SPPACh. 16 - Prob. 8SPPACh. 16 - Prob. 9SPPACh. 16 - Prob. 10SPPA
Ch. 16 - Prob. 11SPPACh. 16 - Prob. 1IAPACh. 16 - Prob. 2IAPACh. 16 - Prob. 3IAPACh. 16 - Prob. 4IAPACh. 16 - Prob. 5IAPACh. 16 - Prob. 6IAPACh. 16 - Prob. 7IAPACh. 16 - Prob. 8IAPACh. 16 - Prob. 9IAPACh. 16 - Prob. 10IAPACh. 16 - Prob. 1MCQCh. 16 - Prob. 2MCQCh. 16 - Prob. 3MCQCh. 16 - Prob. 4MCQCh. 16 - Prob. 5MCQCh. 16 - Prob. 6MCQCh. 16 - Prob. 7MCQ
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