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John runs the only carwash in town; he is a monopolist. John estimates his daily demand for carwashes is given by the expression Q = 100?4P, where Q is the number of carwashes drivers will purchase at price P. It costs John $5 in electricity, soap, etc to run the carwash once. Additionally, John has fixed costs of $300/day.
a. What price should John set for a carwash? What will be his daily profit at this price?
b. If John were to lower his price by $1, he would sell more carwashes, and still be able to charge a priceabove his marginal cost. Explain intuitively why it would not be profit-maximizing to do so.
c. What is John's elasticity of demand at his profit-maximizing price? Is it elastic or inelastic? If it is elastic, why does he not lower his price, as this would surely bring in many more customers? If inelastic, why does he not raise his price?
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If demand is represented by Qd = 50 -.5P +.005I where I is income and I=$50,000 and supply is represented by Qs = 100 +.4P - 2W where W is wages and W=$15.00. a) Compute the equilibrium price and quantity where wages=W=$15.00.
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A monopoly produces widgets at a marginal cost of $10 per unit and zero fixed costs. It faces an inverse demand function given by P = 50 - Q. The demand elasticity of a widget at the monopoly price and quantity is what
The XYZ Company produces whatchamacallits in a perfectly competitive industry. The market price is currently $8.50/unit. Freddie Freeloader, operations manager at XYZ's manufacturing facility in French Lick, Indiana, must decide how many whatcha..
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Since you are not an expert on this type of equipment, you hire a consulting firm to make recommendations. The consultant charged you $1,500 and recommended the purchase of the latest model from Equipment Corp. of America.
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