Should magee increase or decrease the price of pie

Reference no: EM13209456

Magee's Bakery, in downtown Lexington, estimates that its demand for transparent pies has a price elasticity of 1:5.

a. Suppose Magee's were to increase its price. In which direction would each of the following move: revenue, total costs, prot? For each, answer \increase", \decrease", or \uncertain", along with a brief explanation.

b. Suppose Magee's were to decrease its price. In which direction would each of the following move: revenue, total costs, prot? For each, answer \increase", \decrease", or \uncertain", along with a brief explanation.

c. Finally, suppose for part c only that you now have the additional information that the marginal cost to Magee's of making one transparent pie is $2 (and is constant). Magee's currently charges $5 for each transparent pie. Should they increase or decrease this price, or should they leave it at $5?

Reference no: EM13209456

Questions Cloud

Regarding television reporting to the critical thinking : Compare your thinking regarding television reporting to the critical thinking described in the text. How can you improve?

What is the firms percentage markup of price : Suppose a prot-maximizing monopolist is producing 800 units of output and is charging a price of $40 per unit. a. If the elasticity of demand for the product is $ 2, nd the marginal cost of the last unit produced. b. What is the firm's percentage mar..

Define galvanized nails are iron nails : Galvanized nails are iron nails that have been plated with zinc to prevent rusting. The relevant reaction is Zn2+(aq)+2e??Zn(s)

Explain the benefits of planning in relation to disasters : Explain the benefits of planning in relation to disasters and give the general principles involved in building a planning framework.

Should magee increase or decrease the price of pie : Finally, suppose for part c only that you now have the additional information that the marginal cost to Magee's of making one transparent pie is $2 (and is constant). Magee's currently charges $5 for each transparent pie.

Compare-contrast hard-soft methods of beach stabilization : "Compare and contrast hard and soft methods of beach stabilization. What are the various structures or procedures for each method and what is the purpose of each? What are the positive and negative impacts of each?

Compute the free energy change for the reaction : Consider the malate dehydrogenase reaction from the citric acid cycle. Given the following concentrations, calculate the free energy change for this reaction at 37.0 °C (310 K). ?G°\' for the reaction is 29.7 kJ/mol.

Explain the organic compound di-n-butyl phthalate : The organic compound di-n-butyl phthalate, C16H22O4(l), is sometimes used as a low-density (1.046 g·mL-1) manometer fluid. Compute the pressure (in torr) of a gas that supports a 455-mm column of di-n-butyl phthalate. The density of mercury is 13...

What profit level will each firm earn in the short-run : Each of 100 rms in a competitive market has a cost function of c(Q) = 72 + 2Q2, meaning each rm has a marginal cost of MC = 4Q. The market demand curve is QD = 600 5p. a. Solve for the short-run equilibrium price and quantity

User Account

All Pages