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

### Resolved Question:

Hi, I am having trouble with a question. Can you help me with this problem? May I upload the picture?
Submitted: 2 years ago.
Category: Single Problem
Expert:  Chirag replied 2 years ago.
Hi, Welcome and Thanks for using Just Answer

Thanks.
Customer: replied 2 years ago.

Expert:  Chirag replied 2 years ago.
Hi

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

Thanks.
Customer: replied 2 years ago.

okay the answer is supposed to be (c).

Expert:  Chirag replied 2 years ago.
Ok, I will work out and then post the answers.

Thanks.
Customer: replied 2 years ago.

ok

Expert:  Chirag replied 2 years ago.

(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

Customer: replied 2 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?

Expert:  Chirag replied 2 years ago.
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

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Thanks.
Customer: replied 2 years ago.

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

Expert:  Chirag replied 2 years ago.
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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Thanks.

Customer: replied 2 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!

Expert:  Chirag replied 2 years ago.

[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

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Thanks.
Customer: replied 2 years ago.

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

How did you get the 100000? Thanks!

Expert:  Chirag replied 2 years ago.
100000 is the average of 103000 and 97000.

Please Rate My Answer. I get the Credit only when you Rate my answer. (Tip If Happy).

Thanks.
Chirag, Master's Degree
Category: Single Problem
Satisfied Customers: 12192
Experience: Wide experience in teaching

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