Reference no: EM132318022
The demand for Tesla cars (QX) is given by the following equation:
QX = 5480 - 20 PX + 14PY + 200PG
where PX = the price of Tesla cars, currently at 150.
PY = the price of Chrysler cars, currently at 60.
PG= the price of gasoline, currently at 1.4.
The cost per Tesla car is currently 130 and the manufacturer behaves as a monopolist.
(a) What are Tesla's current profits equal to?
(b) Calculate the elasticity of demand for Tesla cars with respect to its own price, the price of Chrysler cars, and the price of gasoline. Are Chrysler and Tesla cars substitutes or complements? What about Tesla cars and gasoline?
(c) What are profits equal to if Tesla Motors maximizes revenue?
(d) What are profits equal to if Tesla Motors maximizes profits?
(e) Calculate the price elasticity of demand for Tesla cars at the profit-maximizing price.
(f) What is consumer surplus equal to at the profit-maximizing price?
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