Answered: 3.4. EZJOINT. After spending 10 years…

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter3: Demand Analysis

Section: Chapter Questions

Problem 8E: The Stopdecay Company sells an electric toothbrush for $25. Its sales have averaged 8,000 units per...

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It is question 3.4 ezjoint

Transcribed Image Text:#3.3. Two years ago, KindOfBlue jeans were priced at $72 and 121,000 units were sold. Last year, the price was lowered to $68 and sales increased to 132,000. (a) Estimate the value of the demand elasticity. (b) Based on your estimate of the demand elasticity, how many units would you expect to be sold if price were lowered by an additional $1? (c) In order to increase profits, should price be lowered below $68? If your answer begins - as it should! - with "it depends," indicate as clearly as possible what additional information you would need and how you would base your answer on such additional information. 13.4. EZJOINT. After spending 10 years and $1.5 billion, you have finally gotten Food and Drug Administration (FDA) approval to sell your new patented wonder drug, which reduces the aches and pains associated with aging joints. You will market this drug under the brand name of EZjoint. Market research indicates that the demand elasticity for EZjoint is -1.25 (at all points on the demand curve). You estimate the marginal cost of manufacturing and selling one more dose of EZjoint is $1. (a) What is the profit-maximizing price per dose of EZjoint? (b) Would you expect the elasticity of demand you face for EZjoint to rise or fall when your patent expires? Suppose that, after patent expiry, a generic version of EZjoint was introduced in the market (under the chemical name clorophospartane). Reacting to entry, EZjoint decided to increase price. (c) Can this behavior be consistent with rational profit maximizing? 3.5. LAS-0-VISION. Las-O-Vision is the sole producer of holographic TVs, 3DTVs. The weekly demand for 3DTVs is D(p) = 10200 - 100 p. The cost of producing q 3DTVs per week is of/2 (note this implies that MC = q). (a) What is Las-O-Vision's total revenue schedule? (b) What is Las-O-Vision's marginal revenue schedule?

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