Managerial Economics

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ANSWERS TO EVEN-NUMBERED PROBLEMS (CHAPTER 3) 2. a. Q = 180 - (1.5)(80) = 60 pairs. R = P . Q = $4,800. b. At P=$100 and Q=30 pairs revenue falls to $3000 per month. c. E P =(dQ/dP)(P/Q). At P = $80, EP = (-1.5)(80/60) = -2; At P = $100, E P = (-1.5)(100/30) = -5. Demand is much more elastic at the higher price. 4. a. This means that if the local population increases by 10 percent, ticket sales will increase by (.7)(10) = 7 percent. The actual population increase of 2.5 percent implies a sales increase of 1.75 percent. b. The 10 percent increase in ticket price implies a (.6)(10) = 6 percent fall in ticket sales. Because demand is inelastic, total ticket revenue increases. c. Here, the increase in total revenue per admission (from $18 to $19) is only 5.55 percent. This is outweighed by the decline in admissions (6 percent) causing total revenue to fall. 6. a. During this period, Mac computers, although technologically superior, were priced out of the range of many consumers. As a result of vigorous competition in the IBM PC clone market, prices of IBM PC clones were significantly lower
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This document was uploaded on 05/06/2011.

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