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Unformatted text preview: It faces an inverse demand function given by P = 50 ‐ Q. Suppose fixed costs rise to $400. What happens in the market? A. The firm will raise the price. B. The firm will shut down immediately. C. The firm continues to produce the same output and charge the same price. D. The firm will reduce its output and raise price. 24. A firm with market power has an individual consumer demand of Q = 20 ‐ 4P and costs of C = 4Q. What is optimal price to charge for a block of 20 units? A. $18. B. $36. C. $72. D. $90. 25. A firm has capacity limitations and charges $30 for their service during daily peak times. If the market demand elasticity drops from ‐3 during peak times to ‐5 at off peak times, how much should the firm charge to earn the maximum profit during off peak times? A. $20. B. $21. C. $24. D. not enough information to determine. 6 26. The above table contains different consumers' values for three software titles: PowerPoint, Excel and Word. Suppose there are 100 consumers of each...
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This note was uploaded on 12/10/2012 for the course ECON 5501 taught by Professor Wing during the Fall '12 term at City University of Hong Kong.

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