Question

A group price discriminator sells its product in Florida for three times the price it sets in New York. Assuming the firm faces the same constant marginal cost in each market and the price elasticity of demand in Florida is -1.4, the demand in New York

	A.	has an elasticity of -1.4.
	B.	has an elasticity of -0.67.
	C.	has an elasticity of -6.0.
	D.	has an elasticity of -7.0.

The difference between the marginal expenditure and the wage is greater when the supply curve of labor is

	A.	more elastic at the monopsony optimum.
	B.	less elastic at the monopsony optimum.
	C.	The difference does not depend on any elasticity.
	D.	more elastic than the demand curve.

Suppose mountain spring water can be produced at no cost and that the demand curves for mountain spring water are given as follows:
Q = 6000 - 4P
What will be the price in the long run if the industry is a Cournot duopoly?

	A.	$700
	B.	$600
	C.	$400
	D.	$500

You interview with an athletic footwear manufacturer that has annual advertising expenditures of $32 million and total sales revenue of $100 million, and the firm selects the profit maximizing level of advertising expenditures. If the advertising elasticity of demand is 0.4, then you know that “Rule of Thumb for Advertising” implies that the demand elasticity for the firm's products is:

	A.	-1.75
	B.	-1
	C.	-1.25
	D.	-1.5

Answer 1

Question 1
A group price discriminator sells its product in Florida for three times the price it sets in New York. Assuming the firm faces the same constant marginal cost in each market and the price elasticity of demand in Florida is -1.4, the demand in New York - (D) has an elasticity of -7.0

Explanation - Please see attached picture