HomeworkLib
Question

A firm with pricing power (i.e. a price-maker) estimates that the elasticity of demand for its...

A firm with pricing power (i.e. a price-maker) estimates that the elasticity of demand for its product is __A___. To maximize profits by what percentage above cost should it markup its price? (Show your work). When A is equal to -9.00.

business   economics   
0 0
Add a comment Improve this question Transcribed image text
Next > < Previous
Sort answers by oldest

Homework Answers

Answer #1

Answer

the markup formula is

markup =-1/(e+1)

e=elastcity

Markup=(-1/(-9+1))

=0.125

=12.5%

it should markup price 12.5 above cost

0 0
Add a comment
Know the answer?
Add Answer to:
A firm with pricing power (i.e. a price-maker) estimates that the elasticity of demand for its...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions

  • Discuss price elasticity of demand and its impact on pricing. How does this elasticity affect the...

    Discuss price elasticity of demand and its impact on pricing. How does this elasticity affect the markup over cost in setting prices? What is the role of variable costing in pricing? What are the problems associated with using absorption costing for setting prices? Discuss the role of using target costing for pricing.

  • AaBbCcDdEe Normal Text Box 1) The suggestion that a seller will try to set price based...

    AaBbCcDdEe Normal Text Box 1) The suggestion that a seller will try to set price based on "what the market will beris explicit recognition of the constraint imposed by: A) the firm's marginal cost of production. B) the price elasticity of demand for that item. C) the firm's competitors. D) the need for most firms to earn positive economic profits over time if they are to remain in 2) By and large, the price of each item on a restaurant...

  • What is limit pricing? a. Suppose your firm produces a product at a constant marginal cost...

    What is limit pricing? a. Suppose your firm produces a product at a constant marginal cost equal to $1. Suppose the elasticity of demand is -3. What is the profit maximizing price if one ignores the possibility of entry? b. suppose at the above price economic profits are quite large. So your firm can expect entry. Assume that if one firm enters it would increase the elasticity of demand from -3 to -4. while if 2 firm enter it would...

  • The manager of a local monopoly estimates that the elasticity of demand for its product is...

    The manager of a local monopoly estimates that the elasticity of demand for its product is constant and equal to -2. The firm's marginal cost is constant at $20 per unit. a. Express the firm's marginal revenue as a function of its price. Instruction: Enter your response rounded to two decimal places. MR = P b. Determine the profit-maximizing price. Instruction: Use the rounded value calculated above and round your response to two decimal places. $

  • The manager of a local monopoly estimates that the elasticity of demand for its product is...

    The manager of a local monopoly estimates that the elasticity of demand for its product is constant and equal to -3. The firm’s marginal cost is constant at $35 per unit. a. Express the firm’s marginal revenue as a function of its price. Instruction: Enter your response rounded to two decimal places. MR = × P b. Determine the profit-maximizing price. Instruction: Use the rounded value calculated above and round your response to two decimal places. $

  • AaBbCcDdEe Normal Text Box 1) The suggestion that a seller will try to set price based...

    AaBbCcDdEe Normal Text Box 1) The suggestion that a seller will try to set price based on "what the market will beris explicit recognition of the constraint imposed by: A) the firm's marginal cost of production. B) the price elasticity of demand for that item. C) the firm's competitors. D) the need for most firms to earn positive economic profits over time if they are to remain in 2) By and large, the price of each item on a restaurant...

  • The manager of a local monopoly estimates that the elasticity of demand for its product is...

    The manager of a local monopoly estimates that the elasticity of demand for its product is constant and equal to -3. The firm’s marginal cost is constant at $30 per unit. a. Express the firm’s marginal revenue as a function of its price. Instruction: Enter your response rounded to two decimal places. MR = ___ × P

  • Assume that the price elasticity of demand for a good is -1.2, and the firm's marginal...

    Assume that the price elasticity of demand for a good is -1.2, and the firm's marginal cost is $2. What price should the firm charge to maximize profits? a. $24 b. $20 c. $18 d. $16 e. $12

  • QUESTION 23 When a good or service is a luxury, its price elasticity of demand tends...

    QUESTION 23 When a good or service is a luxury, its price elasticity of demand tends to be Elastic Inelastic Unit Elastic Unknown QUESTION 24 A decrease in the price of a product that a firm sells will cause the demand for it to increase. True False QUESTION 25 Economic profits are equal to total revenues minus Only implicit costs Only explicit costs Implicit and explicit costs Marginal cost QUESTION 26

  • The manager of a local monopoly estimates that the elasticity of demand for its product is...

    The manager of a local monopoly estimates that the elasticity of demand for its product is constant and equal to -3. The firm’s marginal cost is constant at $30 per unit. a. Express the firm’s marginal revenue as a function of its price. MR = ________ × P b. Determine the profit-maximizing price.

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT