Foundations of Economics (8th Edition)
8th Edition
ISBN: 9780134486819
Author: Robin Bade, Michael Parkin
Publisher: PEARSON
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Chapter 17, Problem 8IAPA
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Suppose that Spacely Sprockets' marginal cost of a jacket is a constant $150 and the total fixed cost at one of its stores is
$3,000 a day. This particular store seils 40 jackets a day, which is its profit-maximizing number of jackets. The nearby
stores begin to advertise their jackets. The Spacely Sprockets store now spends $1,500 a day advertising its jackets, and its
profit-maximizing number of jackets sold jumps to 50 a day. What happens to the price of a Spacely Sprockets' jacket,
Spacely Sprockets' markup, and Spacely Sprockets' economic profit?
The following graph shows the daily demand curve for bippitybops in Detroit.
Use the green rectangle (triangle symbols) to compute total revenue at various prices along the demand curve.
Note: You will not be graded on any changes made to this graph.
PRICE (Dollars per bippitybop)
OTAL REVENUE (Dollars)
2400
1600
100
90
1200
80
1000
70
800
60
50
40
30
20
2200 +
10
2000 +
1800 +
0
1400 +
Calculate the daily total revenue when the market price is $90, $80, $70, $60, $50, $40, $30, and $20 per bippitybop. Then, use the green point
(triangle symbol) to plot the daily total revenue against quantity corresponding to these market prices on the following graph.
(?)
0
**
B
Demand
80
10 20 30 40 50 60 70
QUANTITY (Bippitybops per day)
90 100
Total Revenue
A
?
Total Revenue
Suppose that Tommy Hilfiger's marginal cost of a jacket is $200 and at one of the firm's shops, total fixed cost is $500 a day. The profit maximizing number of jackets sold in this
shop is 30 a day. Then the shops nearby from other retailers start advertising their jackets. The Tommy Hilfiger shop decides to spend $1,000 a day advertising its jackets, and its
profit maximizing number of jackets sold jumps to 60 a day.
Before advertising: Suppose that the price elasticity of demand is 2. Can you compute the price of a Tommy Hilfiger jacket? And the markup? Please, compute the amount of
maximal profits.
Chapter 17 Solutions
Foundations of Economics (8th Edition)
Ch. 17 - Prob. 1SPPACh. 17 - Prob. 2SPPACh. 17 - Prob. 3SPPACh. 17 - Prob. 4SPPACh. 17 - Prob. 5SPPACh. 17 - Prob. 6SPPACh. 17 - Prob. 7SPPACh. 17 - Prob. 8SPPACh. 17 - Prob. 9SPPACh. 17 - Prob. 10SPPA
Ch. 17 - Washtenaw Dairy in Ann Arbor, Michigan, sells 63...Ch. 17 - Prob. 2IAPACh. 17 - Prob. 3IAPACh. 17 - Prob. 4IAPACh. 17 - Prob. 5IAPACh. 17 - Use the following information to work Problems 5...Ch. 17 - Prob. 7IAPACh. 17 - Prob. 8IAPACh. 17 - Prob. 9IAPACh. 17 - Prob. 1MCQCh. 17 - Prob. 2MCQCh. 17 - Prob. 3MCQCh. 17 - Prob. 4MCQCh. 17 - Prob. 5MCQCh. 17 - Prob. 6MCQCh. 17 - Prob. 7MCQ
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