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The table below shows the hypothetical prices and quantities demanded of a software product. Assume that the fixed cost of setting up the production of software is $200 and the marginal cost is $5. a) Fill out the table by calculating the revenue, the marginal revenue, the marginal cost, and the profit. b) Give a general definition of price elasticity of demand. Explain the factors that make the demand of the product more elastic. c) Calculate the own price elasticity of increasing the price from $0 to $5, from $5 to $10, etc., from $35 to $40. In which price region is the demand for the product elastic and in which region is it inelastic? d) Conduct a stay even analysis by calculating the critical loss from increasing the price from $30 to $35. How much business can the software company afford to lose by increasing the price in order to maintain its profit? Price ($) Quantity sold Revenue MR MC Profit Elasticity 40 0 35 10 30 20 25 30 20 40 15 50 10 60 5 70 0 80
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