Week 9 _Assignment III_ (assigned to expert4help)

Arlington Campus Please write the best answer to the following
two problems and submit your response in Black Board under Week 9
_Assignment III_ by 5:30 PM on Monday June 16, 2014. Please be
organized and show all your work. Best of Luck
Chapter 10
7) Royersford Knitting Mills, Ltd, sells a line of women’s knit
underwear. The firm now sells about 20,000 pairs a year at an
average price of $10 each. Fixed costs amount to $60,000, and a
total varibale costs equal $120,000. The production department has
estimated that a 10 percent increase in output would not affect
fixed costs but would reduce average variable cost by 40 cents. The
marketing department advocates a price reduction of 5 percent to
increase sales, total revenues, and profits. The arc elasticity of
demand with respect to prices is estimated at -2. A) Evaluate the
impact of the proposal to cut prices on (i) total revenue, (ii)
total cost, and (iii) total profits. B) If average variable costs
are assumed to remain constant over a 10 percent increase in
output, evaluate the effects of the proposoed price cut on total
profits.
Chapter 11
4. Unique Creations holds a monopoly position in the production
and sale of magnometers. The cost function facing Unique is
estimated to be TC= $100,000 + 20Q
A) What is the marginal cost for Unique B) if the price
elasticity of demand for Unique is currently -1.5, what price
should Unique charge? C) What is the marginal revenue at the price
computed in Part (b)? D) If a competitor develops a substitute for
the magnometer and the price elasticity increases to -3,0, what
price should Unique charge?
Attachments

Week 9 Assignment 3.docx