Find out how many stamps and how many photocopies the firms

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Reference no: EM1364334

In this exercise, you work with products the consumer considers perfect complements.

A small firm has a budget of $250 to mail out fliers to clients. Each flier requires 1 photocopy and 1 stamp. Photocopies costs $.10, each, stamps cost $.4 each.

a) Find the number of stamps the firm buys.

b) In a diagram, illustrate the firm's budget constraint and optimal choice. Pay attention to the shape of the firm's indifference curves.

Suppose the firm is not sure what price it will be charged to mail the fliers. The project manager however wants an estimate of the photocopies she has to order depending on the price of the stamps

c) Call P the unit price of each stamp and find how many stamps and how many photocopies the firms purchase depending on the value of P.

Reference no: EM1364334

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