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aliya0001 [1]
3 years ago
11

Suppose there is one firm in a market with linear demand function. The firm has a constant marginal cost of $9. The firm is curr

ently charging $15 per unit, where the elasticity of demand is 3. The new CEO of this firm suspects that the current pricing strategy of this firm might not be profit maximizing. He hires you as an economic consultant to offer advice to this firm. Base on the information given, is the firm currently maximizing profits (choosing a monopoly price and quantity)? If not, should the firm raise its price or lower its price? Explain.
Business
1 answer:
Paul [167]3 years ago
4 0

Answer:

We employ the fact that Pprofit Maximizing Price = Marginal cost * (ed/ed + 1)

Price = $9 * (-3 / (-3 + 1))

Price = $9 * (-3/-2)

Price = $9 * 1.5

Price = $13.5

As we can see that the profit maximizing price is 13.5. Whereas, the current price of $15 which is not profit maximizing. So the firm should reduce the price to 13.5 per unit so as to be maximizing profit.

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Answer:

The answer to this question can be defined as follows:

Explanation:

Please find the table in the attached file.

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3 years ago
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Which of the following is located at the point where the supply and demand curves intersect?
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Answer:

Equilibrium point

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4 years ago
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The change in period-to-period operating income when using variable costing can be explained by the change in the
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Answer:

Unit sales level multiplied by a constant unit contribution margin.

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The change in period-to-period operating income when using variable costing can be explained by the change in the Unit sales level multiplied by a constant unit contribution margin.

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Answer:

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Explanation:

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