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Chirag
Chirag, Master's Degree
Category: Single Problem
Satisfied Customers: 12192
Experience:  Wide experience in teaching
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Hi, I am having trouble with a question. Can you help me with

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Hi, I am having trouble with a question. Can you help me with this problem? May I upload the picture?
Hi, Welcome and Thanks for using Just Answer

Please post the picture. I will help you if possible.

Thanks.
Customer: replied 3 years ago.

Hi

I am working on this and will post the answer as soon as ready

Thanks.
Customer: replied 3 years ago.

okay the answer is supposed to be (c).

Ok, I will work out and then post the answers.

Thanks.
Customer: replied 3 years ago.

ok

(1)
Because each dozen of sea shells costs $3.50, the additional revenue earned by selling one more dozen of sea shells is $3.50. This means Marginal Revenue (MR) = $3.50
Marginal cost (MC) is the additional cost incurred in procuring one dozen more sea shells. The marginal cost for different quantities given in the table are $1, $1.50, $1.50, $2, $2.50, $3.50.
For a perfectly competitive firm, profit is maximized when MC = MR
So, MC = MR = $3.50, and the corresponding quantity is 206
Answer: (C) 206 dozen sea shells by the sea shore per day

(2)
Price elasticity of demand =
|(Change in quantity/Average quantity) / (Change in price/Average price)|
= |{(1300 - 1500)/1400}} / {(3.25 - 3)/3.125}| = |-1.786| = 1.786
Since price elasticity of demand > 1, the demand is elastic.
Initial revenue = 1500 * $3 = $4500
Final revenue = 1300 * $3.25 = $4225
Thus, there is a decrease in the revenue
Answer: (A) Elastic, Decreases

 

 

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Customer: replied 3 years ago.

Thanks so much for the answer, i got it now! Sorry, just two more questions, how do you solve the answer for this?

 

Paula's revenue = $150000
Paul's cost = $48000 + $42000 + $20000 = $110000
Paula's profit last year = $150000 - $110000 = $40000

Laura could have earned a sum of $40000 as a cookbook writer

So, here economic profit = $40000 - $40000 = 0

Answer: (A) $0.0 per year

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Customer: replied 3 years ago.

what about the "as a chef in another restaurant and earned $35,000." We dont include that? why?

Paula's capacity to earn is the greater of the two figures, which is $40,000. Therefore, we discard $35,000 and consider $40,000.


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Customer: replied 3 years ago.

Sorry I've uploaded another image but you haven solve that yet.. You might have miss it.. Possible to help me with that one last question? Thanks!



[Here percent change is calculated with average value as the basis]

Percent change in demand = = {(103000 - 97000)/100000} * 100} = 6

Percent change in price = 10

Elasticity of demand = Percent change in demand/Percent change in price

= 6/10

= 0.60

Answer: (C) 0.60

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Customer: replied 3 years ago.

Percent change in demand = = {(103000 - 97000)/100000} * 100} = 6


 


How did you get the 100000? Thanks!

100000 is the average of 103000 and 97000.


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