Suppose you are modeling the demand for textbooks at the UNT bookstore for four classes: Freshmen,...

Transcribed Image Text:

Suppose you are modeling the demand for textbooks at the UNT bookstore for four classes: Freshmen, Sophomores, Juniors and Seniors. If you use a constant term and 3 independent variables (price, income, and Amazon.com's price), how many dummy variables do you use to capture the effects of class? Assume that the price elasticity of demand for a good is -1.5, and the firm's marginal cost is $7. What price should the firm charge to maximize profits? A demand function for good x is given by: Qxd=25P,-0.521 1.30 When I (Income) = 10 and Px (price of good x)= 2, the price elasticity of demand is: Suppose you are modeling the demand for textbooks at the UNT bookstore for four classes: Freshmen, Sophomores, Juniors and Seniors. If you use a constant term and 3 independent variables (price, income, and Amazon.com's price), how many dummy variables do you use to capture the effects of class? Assume that the price elasticity of demand for a good is -1.5, and the firm's marginal cost is $7. What price should the firm charge to maximize profits? A demand function for good x is given by: Qxd=25P,-0.521 1.30 When I (Income) = 10 and Px (price of good x)= 2, the price elasticity of demand is:

Answer rating: 100% (QA)

ANSWER To maximize profits we need to set the marginal revenue equal to marginal cost which can be e... View the full answer