Please Provide explanation for each questions: The answers are 19) A 20) A 23) B
ID: 1099745 • Letter: P
Question
Please Provide explanation for each questions: The answers are
19) A
20) A
23) B
24) C
19. If Pizza Hut raises the price of a slice of pizza from $3.00 to $3.25, the quantity demanded decreases from 1,500 slices per week to 1,300 slices per week. The demand for slices of pizza is ________ and the total revenue received by this Pizza Hut ________.
A. elastic? decreases
B. inelastic? decreases
C. elastic? increases
D. inelastic? decreases
20. Paula Deen runs a seafood restaurant in Savannah, Georgia. Her total revenue last year was $150,000. The rent on her restaurant was $48,000, her labor costs were $42,000, and her materials, food, and other variable costs were $20,000. Paula Deen could have worked as a cookbook writer and earned $40,000 per year or as a chef in another restaurant and earned $35,000. Paula Deen
Explanation / Answer
19)
dQ = 1300 -1500 = -200
dP = 3.25 - 3 = 0.25
Q = (1500+1300)/2 = 1400
P = (3+3.25)/2 = 3.125
so (dQ/Q)/(dP/P) = -1.786
hence it is elastic.
Now change in revenue = 3.25*1300 - 3*1500 = - $ 275 ......(negative sign indicates decrease in revenue)
thus ans is A
20)
Revenue recieved from sale = 150,000 - 48,000 -42,000 -20,000 = $40,000
Opportunity cost = $40,000
Economic profit = Revenue recieved - Opportunity cost = 40,000 - 40,000 = 0
so ans is A
23)
When demand is inelastic , it means that if we increase price then there will be very little or no change in the demand.
Thus the revenue has to increase because Revenue = Price * Demand.....and Price is increasing with Demand remaining the same.
24)
Sorry I don't know