# Consider the following demand

Consider the following demand functions and total cost function faced by a monopolist where Q is output, PL is the price based on low demand, and PH is the price based on high demand.

Q = 50 – 0.25PL                          Low Demand Function

Q = 200 – 0.50PH                        High Demand Function

TC = 2,500 + 50Q + 0.50Q2                Total Cost Function

Suppose that there is a 75% chance of low demand and a 25% chance of high demand.

1) Determine the monopolist’s profit maximizing level of output.

2) Determine the monopolist’s expected profit maximizing price.

# Consider the following demand

Question #2

Consider the following demand function for frozen dinners where QD is the quantity of frozen dinners demanded per week, P is the price per frozen dinner, PF is the price per fast food meal, Y is the average yearly consumer income, and A is the number of advertisements for frozen dinners.

Demand Function for Frozen Dinners: QD = 1,000 – 10P + 20PF – 0.01Y + A

Suppose that a frozen dinner sells for \$4, a fast food meal sells for \$6, average yearly consumer income is \$50,000, and that there are 20 advertisements for frozen dinners.

1. Calculate and interpret the income elasticity of demand.
2. Calculate and interpret the cross-price elasticity of demand with respect to fast food meals.

# Consider the following demand

Consider the following demand functions and total cost function faced by a monopolist where Q is output, PL is the price based on low demand, and PH is the price based on high demand.

Q = 50 – 0.25PL                                Low Demand Function

Q = 200 – 0.50PH                             High Demand Function

TC = 2,500 + 50Q + 0.50Q2                     Total Cost Function

Suppose that there is a 75% chance of low demand and a 25% chance of high demand.

1. Determine the monopolist’s profit maximizing level of output.
2. Determine the monopolist’s expected profit maximizing price.

# Consider the following demand

Consider the following demand schedule.
Price
Quantity Demanded
\$25 20
\$20 40
\$15 60
\$10 80
\$5 100

Complete the following table by calculating the price elasticity of demand between specified points and indicating whether the demand is elastic, inelastic, or unit elastic. (Hint: Use the midpoints formula.)
Interval
Price Elasticity of Demand
Elastic, Inelastic, or Unit Elastic
From P = \$25 to P = \$20
From P = \$20 to P = \$15
From P = \$15 to P = \$10
From P = \$10 to P = \$5

# Consider the following. Demand

Consider the following. Demand Function Quantity Demanded

p = 800 − 3x      x = 19

Find the price elasticity of demand for the demand function at the indicated x-value.

Is the demand elastic, inelastic, or of unit elasticity at the indicated x-value?
The demand is elastic at this x-value.
The demand is inelastic at this x-value.
The demand is of unit elasticity at this x-value.

Identify the intervals of elasticity and inelasticity. (Enter your answers using interval notation. If an answer does not exist, enter DNE.)
elastic:
inelastic:

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