elasticity estimation

Elasticity Estimation. Breakaway Tours, Inc., has estimated the following multiplicative demand function for packaged holiday tours in the Flushing, NY, market using quarterly data covering the past five years (20 observations). (ss) = subscript (SS) = superscript Q(ssy) = 5P(ssy)(SS-2.5)P(ssx)(SS1)A(ssy)(SS2)A(ssx)(SS1)I(SS2) R^2 = 0.90, standard error of the estimate = 10 Here, Q(ssy) is the quantity of tours sold, P(ssy) is average tour price, P(ssx) is average price for some other good, A(ssy) is tour advertising, A(ssx) is advertising of some other good, and I is per capita disposible income. The standard errors of the exponents in the preceeding multiplicative demand funct... click for more

3945-constrained optimization

Enpar manufactures engine parts for an automotive manufacturer. It operates two plants which have the following production functions: Plant A: Qa = 30 Sa - 0.25 Sa^2 Plant B: Qb = 40Sb - 0.50Sb^2 where Qa is the unit output from plant A, Qb is the unit output from plant B and Sa and Sb are the units of the variable factor steel used, respectively at plant A and B. A) Suppose the steel availability is 30 units. What is the optimal allocation between the two plants? B) A sudden supplier problem reduces availability of steel to plant B by 10 units. How should Enpar reallocate steel between the plants? Explain.

3951-econ

Subject: Kinked Demand Curve / Oligopolistic market Details: The kinked demand curve in an oligopolistic market is represented by the following: P = 100 - Q and P = 120 - 2*Q The oligopoly firms have constant marginal costs at MC = 40 A. Determine the profit maximizing level of output. B. Compute the profit maximizing price. C. Calculate the upper and lower limits within which marginal cost may vary without affecting the profit maximizing output or the price.

Problem set

2. A firm finds that at its MR = MC output, its TC = $1000, TVC = $800, TFC = $200, and total revenue is $900. This firm should: (1 point) a. shut down in the short run. b. produce because the resulting loss is less than its TFC. c. produce because it will realize an economic profit. d. liquidate its assets and go out of business. 5. Suppose a firm in a purely competitive market discovers that the price of its product is above its minimum AVC point but everwhere below ATC. Given this, the firm: (1 point) a. minimizes losses by producing at the minimum point of its AVC curve. b. maximizes profits by producing where MR = ATC. c. should close dow... click for more

Inelasticity

What can add to (or reduce) a product's relative inelasticity?