1.The demand function for school lunches in Pittsburgh has been estimated to be Q = 20,625.32 150.521 P Where Q = quantity of lunches served and P =
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Question

1.    The demand function for school lunches in Pittsburgh has been estimated to be QP

 = 20,625.32 − 150.521

Where Q = quantity of lunches served and P = price in cents.

What is the arc price elasticity of demand between prices of 80 cents and $1.00? What is the economic interpretation of the computed figure?


2.   A firm operating in a monopolistically competitive market faces demand and marginal revenue curves as given below:

 

P = 8 − 0.075Q

MR = 8 − 0.15Q

 

The firm's total cost curve is:

 

TC = −7Q + 0.025Q3 + 110

 

Where P is in dollars per unit, output rate Q is in units per time period, and total cost TC is in dollars.

Determine the price and output rate that will allow the firm to maximize profit or minimize losses. 

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