Quiz 3 - The firm, like all firms, wants to make more...

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Quiz #3 – ManEc 387 1.) The demand curve for a firm is given by Q x = 1,000 – 5P x + .02P y . Calculate the cross-price elasticity when P x = $150 and P y = $200. (5 pts) a.) Is good Y a substitute or complement for good X? (2.5 pts) 2.) Analysts at your firm have calculated that, at the current price, customer elasticity for your firm’s product is -0.7.
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Unformatted text preview: The firm, like all firms, wants to make more money. The CEO has forgotten everything she learned in ManEc 387 and is relying on you to interpret the elasticity for her. Based on the elasticity of -0.7, should the firm raise or lower the price of its product (if it wants to increase revenue)? (2.5 pts)...
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