CH 6 Questions SOLUTIONS MANUAL.docx

# CH 6 Questions SOLUTIONS MANUAL.docx - CH 6 Questions...

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CH 6 Questions SOLUTIONS MANUAL 1 Consider the linear demand function Q = 20 – 0.5 P. a. Write the inverse demand function. b. Write the total revenue function. c. Using calculus, find the level of output, Qrmax , where total revenue reaches its maximum value. What price Prmax maximizes total revenue? What is the value of TR at its maximum point? d. Write the equation for marginal revenue. Using MR, verify that Qrmax derived in part c maximizes total revenue. 2 Assume that the demand for cosmetic or plastic surgery is price inelastic. Are the following statements true or false? Explain. a. When the price of plastic surgery increases, the number of operations decreases. b. The percentage change in the price of plastic surgery is less than the percentage change in quantity demanded. c. Changes in the price of plastic surgery do not affect the number of operations. d. Quantity demanded is quite responsive to changes in price.

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• Spring '08
• ISSE

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