29. Given the following demand and cost functions, determine the output and sale

Question

29. Given the following demand and cost functions, determine the output and sales level that maximize profit.
Demand Function: Q = 25- P; Cost Function: TC = 20+5Q +Q2 (Points : 1)                                           20 Units
                                        200 Units
                                        5 Units
                                        None of the Above
                                            
                         

                     30. Assume the price of product B, increases from $1 to $1.50. As a result, the quantity demanded of product "A increases from 500 to 600 a month. This indicates that the cross-price elasticity and relationship between the two products. (Points : 1)                                           .50, Substitutes
                                        .45, Substitutes
                                        .45, Complements
                                        .50, Complements
                                        Products are not related
                         

Explanation / Answer

31. formula between Price elasticity of demand and Marginal Revenue:

MR = P * [ ( 1 + E ) / ( E ) ]

15 = P*[(1-1.2)/-1.2)]

15 = P/6

P = 15*6 = 90 (non of the above)

32. non of the above. This is because the income elasticity of demand is not the same at every point of the demand curve. For example, when income is high, people are less sensitive to the income of their goods as compared to the income when low.

(Source: I'm an economics major )

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