Question

can someone explain #9, #10, #11 and #14 to me? answers are already there, i want to know the reason.

9. A firm produces 300 units of output at a total cost of $1,000. If fixed costs are $100, average fixed cost is $10, a. o oco b average variable cost is $3. veo average total cost is $4. n gnilasqe sein yd sbd vino bluow C. d. average total cost is $5. yd boyolomo teimonous ns d ohm ad vino blow X 10. When demand is elastic, an increase in price will cause odTsobg a decrease in total revenue. B.s che s ad GA1C boog eidh o tong а. b. an increase in profit. too of Iaupe b iasio the answer depends on the supply curve. с. r0or laupo bne oitesloni d this cannot be answered without knowing the original and new quantity. d. po bna o 11. Suppose the price of potato chips increases from $1.25 to $1.40 and, as a result, the quantity of potato chips demanded decreases from 40 to 30. Using the percent change method, the price elasticity of demand for potato chips is a. 3.11 b. 2.52 c 2.08

Answer 1

9. The correct option is indeed

• b. average variable cost is $3.

We have , and since total cost is sum of fixed cost and variable cost, we have , ie , and for fixed cost of $100, we have or (for 300 units of quantity). The average variable cost would be as
AVC = نی
dollars.

10. The correct option is indeed

• a. A decrease in total revenue.

The elasticity of demand is the percent change in quantity due to a unit percent increase in price. If the demand is elastic, we may say that the the percent decrease in quantity is more than the percent decrease in price. The total revenue is
TR = PO
, and we have
In (TR) = In(P) + In(Q)
and
-d(TR) HP TRP+ +
or
TRG = P +0%
. This means that, if the percentage reduction in quantity is more than the percentage increase in price, then the percentage change in TR will be negative.

The change profit, however, is uncertain, as that requires the cost specifications.

11. The correct option is indeed

• c. 2.08

The percentage change in price is
P%=- Р -* 100
or
DIY P% = 1.40 - 1.25 -* 100 1.25
or
༼ ༤ . 15 1.2ད* 10f
or
pl% = 12
, meaning that the price increased by 12%. The percentage change in demand is
% - 22 - 01 - 0 100 121
or $Q\% = \frac{30 - 40}{40}*100$ or
0% =-* 100
or
0% = -25
, meaning that the quantity demanded decreased by 25%. The price elasticity would be
= -2.0833 -2.08
. The arc elasticity method would, however, give the elasticity to be 2.52.

14. The correct option is indeed

• inelastic and equal to 0.67.

The price elasticity is . If the elasticity is less than 1, then the demand is said to be inelastic, meaning that for a unit percent increase in price, the demand would decrease by less than a unit percent.

--15 == -0.6667 -0.67