Microeconomics (7th Edition)
7th Edition
ISBN: 9780134737508
Author: R. Glenn Hubbard, Anthony Patrick O'Brien
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Question
Chapter 6, Problem 6.1.10PA
To determine
Whether the publisher’s analysis is correct or not.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
The publisher of a magazine gives his staff the following information:
Current price
Current sales
Current revenue
Current total costs
$2.00 per issue
150,000 copies per month
$300,000 per month
$450,000 per month
He tells the staff, "Our costs are currently $150,000 more than our revenues each
month. I propose to eliminate this problem by raising the price of the magazine to
$3.00 per issue. This will result in our revenue being exactly equal to our cost."
Refer to the table above, which of the following statements is correct?
The publisher's analysis is correct only if the demand is elastic.
The publisher's analysis is correct only if the demand is perfectly elastic.
The publisher's analysis is correct only if the demand is unit elastic.
The publisher's analysis is correct only if the demand is perfectly inelastic.
Question content area
Part 1
Charles Lackey operates a bakery in Idaho Falls, Idaho. Because of its excellent product and excellent location, demand has increased by
25% in the last year. On far too many occasions, customers have not been able to purchase the bread of their choice. Because of the size of the store, no new ovens can be added. At a staff meeting, one employee suggested ways to load the ovens differently so that more loaves of bread can be baked at one time. This new process will require that the ovens be loaded by hand, requiring additional manpower. This is the only thing to be changed. The bakery currently makes
1,800 loaves per month. The pay will be $
8 per hour for employees and each employee works 160 hours per month.
Charles Lackey can also improve the yield by purchasing a new blender. The new blender will mean an increase in his investment. This new blender will mean an increase in his costs of $
100 per month, but he will achieve the same…
The following graph illustrates the weekly demand curve for motorized scooters in Scottsdale.
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 scooter)
TOTAL REVENUE (Dollars)
8700
8100
7500
6900
6300
5700
5100
4500
3900
325
3300
300
275
250
225
200
175
150
125
100
75
On the following graph, use the green point (triangle symbol) to plot the weekly total revenue
when the market price is $50, $75, $100, $125, $150, $175, and $200 per scooter.
(?)
50
25
0
0
10 20
*4
0 25 50
Xo
Demand
30 40 50 60 70 80 90 100 110 120 130
QUANTITY (Scooters)
Total Revenue
75 100 125 150 175 200 225 250 275 300 325
PRICE (Dollars per scooter)
(?)
Total Revenue
According to the midpoint method, the price elasticity of demand between points A and B is
approximately
Chapter 6 Solutions
Microeconomics (7th Edition)
Ch. 6 - Write the formula for the price elasticity of...Ch. 6 - If a 10 percent increase in the price of Cheerios...Ch. 6 - Prob. 6.1.3RQCh. 6 - Prob. 6.1.4RQCh. 6 - Prob. 6.1.5PACh. 6 - Prob. 6.1.6PACh. 6 - Jacob Goldstein, a correspondent for National...Ch. 6 - Prob. 6.1.8PACh. 6 - In 1916, Ford Motor Company sold 500,000 Model T...Ch. 6 - Prob. 6.1.10PA
Ch. 6 - What are the key determinants of the price...Ch. 6 - Prob. 6.2.2RQCh. 6 - Prob. 6.2.3PACh. 6 - According to a news story about the bus system in...Ch. 6 - Prob. 6.2.5PACh. 6 - The price elasticity of demand for crude oil in...Ch. 6 - Prob. 6.2.7PACh. 6 - Prob. 6.3.1RQCh. 6 - Prob. 6.3.2RQCh. 6 - Prob. 6.3.3PACh. 6 - Prob. 6.3.4PACh. 6 - Prob. 6.3.5PACh. 6 - Prob. 6.3.6PACh. 6 - Prob. 6.3.7PACh. 6 - Prob. 6.3.8PACh. 6 - Prob. 6.3.9PACh. 6 - Prob. 6.3.10PACh. 6 - Prob. 6.3.11PACh. 6 - Prob. 6.3.12PACh. 6 - Prob. 6.4.1RQCh. 6 - Prob. 6.4.2RQCh. 6 - Prob. 6.4.3PACh. 6 - Prob. 6.4.4PACh. 6 - Prob. 6.4.5PACh. 6 - Prob. 6.4.6PACh. 6 - Prob. 6.4.7PACh. 6 - (Related to the Apply the Concept on page 199) The...Ch. 6 - Prob. 6.4.9PACh. 6 - Prob. 6.5.1RQCh. 6 - Prob. 6.5.2PACh. 6 - (Retated to Solved Problem 6.5 on page 200)...Ch. 6 - Prob. 6.5.4PACh. 6 - Prob. 6.5.5PACh. 6 - Prob. 6.5.6PACh. 6 - Prob. 6.5.7PACh. 6 - Write the formula for the price elasticity of...Ch. 6 - Prob. 6.6.2RQCh. 6 - Prob. 6.6.3PACh. 6 - Prob. 6.6.4PACh. 6 - Prob. 6.6.5PACh. 6 - Use the midpoint formula for calculating...Ch. 6 - Prob. 6.6.7PACh. 6 - Suppose that on most days, the price of a rose is...Ch. 6 - Use the graph of the market for basketball tickets...Ch. 6 - Prob. 6.2CTE
Knowledge Booster
Similar questions
- The blue curve on the following graph represents the demand curve facing a firm that can set its own prices. Use the graph input tool to help you answer the following questions. You will not be scored on any changes you make to this graph. Note: Once you enter a value in a white field, the graph and any corresponding amounts in each grey field will change accordingly. PRICE (Dollars per unit) 100 TOTAL REVENUE (Dollars) 90 80 20 10 0 1250 1125 1000 875 750 625 500 On the previous graph, change the number found in the Quantity Demanded field to determine the prices that correspond to the production of 0, 10, 20, 25, 30, 40, or 50 units of output. Calculate the total revenue for each of these production levels. Then, on the following graph, use the green points (triangle symbol) to plot the results. 375 250 125 + 0 0 0 Demand 5 10 15 20 25 30 35 40 45 50 QUANTITY (Units) + 5 20 10 15 25 30 35 QUANTITY (Number of units) 40 Graph Input Tool Market for Goods 45 50 Quantity Demanded (Units)…arrow_forwardBigSwaba Corp produces virus home test kits which it sells in the market. It pays a marketing company to post Instagram images of people using the kits in the comfort of their own homes. The demand for the kits and cost of production are as follows: 1 1 Cost: C=200+=q´ +m 1/2 Demand: p=48+m/: Where m is the firm's marketing expenditure. Assume the CEO of BigSwaba asks you to help the company maximize profit. а. How many kits should the company sell and at what price? b. What is the demand elasticity at this output level? C. What should their marketing budget be? Assume the CEO of BigSwaba realizes her bonus will determined not by profits, but by the firm's revenue. Maintaining the same marketing budget as in part a: d. What quantity should the firm produce to maximize revenue?arrow_forwardQ.5 A firm is making two products A & B. Each unit of A incurs a cost of production to the tune of $150 and that of B incurs a cost of $200. Product A earns a profit of $15/unit and B gets $20/unit. The estimated monthly demand of both A & B is at maximum 500 units. Monthly production budget is set at $50,000.How many units of A & B should the firm make in order to maximize profit. Conduct sensitivity analysis and answer the following questions: 1. State the optimal solution. 2. What is the objective function value? 3. Find out the range of profit for A in the objective function for which the above solution remains optimal. 4. Which constraint/s is/are binding? 5. Interpret the shadow price for production budget.arrow_forward
- On average, the price of a patented pharmaceutical drops between 30 and 50 percent after the patent expires. Explain why this occurs. (Do not use AI).arrow_forwardExercise 5.4 A company is producing and selling branded milk with the following total cost function: CT(q)= 0.2q²+q+70. If the demand function for this brand of milk is: P=15-0.5q: a) Calculate the optimal price of milk, as well as the optimal quantity sold and the profits of the company. b) Calculate the price elasticity of demand in the equilibrium of the company. c) Justify why the company has an excess of productive capacity. d) Represent graphically.arrow_forwardDescribe the relationship between elasticity and total revenue when considering an increase in price. You are the manager of a train company. Recently total sales have been a bit low and you are now considering means to give sales a boost. Market research has shown that currently the price of train tickets is historically low. Market research has also shown that the demand curve for train tickets is downward sloping. You may assume that your company is not a price taker on the market. 2. One of your colleagues has suggested that it is important to lower the price of train tickets. In that case, she argues, the demand will increase. Do you agree with her? Explain why. 3. She continues her argument by concluding that if the demand goes up, the total value of sales of train tickets should therefore increase. Do you agree with her? Explain why.arrow_forward
- A company produces a special new type of TV. The company has fixed costs of $468,000, and it costs $1400 to produce each TV. The company projects that if it charges a price of $2400 for the TV, it will be able to sell 750 TVs. If the company wants to sell 800 TVs, however, it must lower the price to $2100. Assume a linear demand. What price should the company charge to earn a profit of $742,000?arrow_forwardBill runs a business that makes custom-printed towels. It will cost him $8 each to purchase and print on towels, and he will have to pay a rent of $1,700 per month for him workshop. Based on market research, Bill estimates that he can sell custom towels for $25 each. a) Calculate the number of towels he needs to sell per month to break-even. towels b) Calculate the break-even in dollars (round off to the nearest cent).arrow_forwardFemi's HookNLadder is the only company selling fire engines in the fictional country of Alexandrina. Femi Initially produced five trucks, but then decided to increase production to six trucks. The following graph gives the demand curve faced by Femi's HookNLadder. As the graph shows, in order to sell the additional fire truck; Femi must lower the price from $160,000 to $120,000 per truck. Notice that Femi gains revenue from the sale of the additional engine, but at the same time, he loses revenue from the initial five engines because they are all sold at the lower price. Use the purple rectangle (diamond symbols) to shade the area representing the revenue lost from the initial five engines by selling at $120,000 rather than $160,000. Then use the green rectangle (triangle symbols) to shade the area representing the revenue gained from selling an additional engine at $120,000. PRICE (Thousands of dollars per fire engine) 8 8 2 2 2 2 8 2 2 2 20 220 200 180 160 140 120 100 60 40 0 2 3…arrow_forward
- Term used to describe demand that can be accuratelycalculated to meet the need of a production schedule,for example.arrow_forwardJohnny Rockabilly has just finished recording his latest CD. The company can produce the CD with no fixed cost and a variable cost of $18 per CD. His record company's marketing department determines that the demand for the CD is as follows: Complete the following table by computing total revenue for each quantity listed and marginal revenue for each 5,000 increase in the quantity sold. Price Number of CDs Total Revenue Marginal Revenue (Dollars) (Dollars) (Dollars) 30 10,000 28 15,000 26 20,000 24 25,000 22 30,000 20 35,000 Profit is maximized at a quantity of $? CDs and a price of $ ? . This results in a profit of $ ? If you were Johnny's agent, you would advise Johnny to demand a recording fee of from the record company. $ ?arrow_forwardThe following table represents the demand schedule (given by the first two columns of the table), TC, MC, TR and MR for one of many landscaping companies in Florida. The service the company provides includes mowing, planting some flowers and trimming trees. Use the information from the table to answer the questions below. The goal of the landscaping company is to maximize its profit. How many customers should it serve per day? What price should it charge? How much profit does this company make per day if it is maximizing its profit?arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Exploring EconomicsEconomicsISBN:9781544336329Author:Robert L. SextonPublisher:SAGE Publications, Inc
Economics: Private and Public Choice (MindTap Cou...EconomicsISBN:9781305506725Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. MacphersonPublisher:Cengage Learning
Microeconomics: Private and Public Choice (MindTa...EconomicsISBN:9781305506893Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. MacphersonPublisher:Cengage Learning
Economics (MindTap Course List)EconomicsISBN:9781337617383Author:Roger A. ArnoldPublisher:Cengage Learning
Managerial Economics: Applications, Strategies an...EconomicsISBN:9781305506381Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. HarrisPublisher:Cengage Learning
Exploring Economics
Economics
ISBN:9781544336329
Author:Robert L. Sexton
Publisher:SAGE Publications, Inc
Economics: Private and Public Choice (MindTap Cou...
Economics
ISBN:9781305506725
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:Cengage Learning
Microeconomics: Private and Public Choice (MindTa...
Economics
ISBN:9781305506893
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:Cengage Learning
Economics (MindTap Course List)
Economics
ISBN:9781337617383
Author:Roger A. Arnold
Publisher:Cengage Learning
Managerial Economics: Applications, Strategies an...
Economics
ISBN:9781305506381
Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher:Cengage Learning