Use the following data to answer the questions below. Question 5 Not yet answere

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Use the following data to answer the questions below.

Question 5

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Using OLS, the estimated inverse demand function (P=f(Q)) is

Select one:

a. P=0.530+0.0004Q

b. Q=16.739.02P

c. P=8.850.004Q

d. Q=2509.48283.4P

Question 6

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Using algebra to transform the indirect demand function, the direct demand function (Q=f(P)) is

Select one:

a. P=11704.80Q

b. Q=2509.5283.4P

c. Q=8.8550.004P

d. Q=16.739.02P

Question 7

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Using calculus to determine dQdP, construct a column which calculates the point-price elasticity for each (P,Q) combination. What is the point price elasticity of demand when P=$3.98?

Select one:

a. 0.278

b. -0.844

c. -0.581

d. 1337

Question 8

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What is the point price elasticity of demand when P=$3.81?

Select one:

a. -1.235

b. -0.755

c. 5447

d. 1430

Question 9

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To maximize total revenue, what would you recommend if the company was currently charging P=$4.53? If it was charging P=$3.81?

Select one:

a. Price should be lower than both $4.53 and $3.81.

b. Lower the price if it is currently $4.53; raise the price if it is currently $3.81.

c. Raise the price if it is currently $4.53; lower the price if it is currently $3.81.

d. Price should be raised above both $3.81 and $4.53.

Question 10

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Use your indirect demand function to determine an equation for TR and MR as functions of Q. What is total revenue when P=$4.80 and when P=$3.81?

Select one:

a. At P=$4.80, TR=$1,163; at P=$3.81, TR=$755.

b. At P=$4.80, TR=$5,530; at P=$3.81, TR=$5,447.

c. At P=$4.80, TR=$2,798; at P=$3.81, TR=$2,245.

d. At P=$4.80, TR=$6,384; at P=$3.81, TR=$7,331.

Question 11

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What is the total-revenue maximizing price and quantity, and how much revenue is earned there?

Select one:

a. P=$4.43, Q=1,255, TR=$5,555

b. P=$3.64, Q=1,492, TR=$5,398

c. P=$3.72, Q=1,442, TR=$5,432

d. P=$4.23, Q=1,389,

P Q $4.80 1170 $4.53 1235 $3.98 1337 $3.72 1442 $3.49 1548

Explanation / Answer

5) To find correct Inverse demand function put given values in table into each of given function as follows:

Put 1170 in place of Q into P=0.530+0.0004Q

P = 0.998 But in table the corresponding price is $4.80.

Now put 1170 in place of Q into Q=16.73+9.02P

P = $131 agian it is not correct.

Again put 1170 in place of Q into P=8.850.004Q

P = 4.17

This is closest. Hence option C is correct answer.

6) We have indirect demand function as:

P=8.850.004Q

Rearrange the values to get Q as function of P to get direct demand function

0.004Q = 8.85-P

or Q = 8.85/0.004 - P/0.004

Q = 2213.75 - 250P

Optioon B is more close hence B is correct.

7) dQ/dP = -283.94

Elasticity = dQ/dP * P/Q

When P = 3.98 then Q = 2509.5283.4(3.98) = 1381.568

Hence elasticity = -283.94 * 3.98/1381.568 = -0.81

Option B is correct.

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