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Question: use the appropriate formulas to answer each of the following...

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Exercise 1. Taco Del Mar has completed a study of weekly demand for its tacos in Washington States regional markets. The study produced the following demand function: Q-650-I ,000P + 0.8A + 65Pop + 500P, where Q is the number of tacos sold per store per store per week; A is the level of local advertising expenditure in dollars; Pop is the local population in thousands; and Pe is the average taco price of local competitors. For the typical Taco Del Mar outlet, P - $2.50, A- S6,000, Pop-70, and Pc $2.25Use the appropriate formulas to answer each of the following:

a) Estimate the weekly revenue in dollars for the typical Taco Del Mar (given the above information).

b) What is the own price elasticity for Taco Del Mar tacos under typical conditions?

c) Should Taco Del Mar raise its taco prices? Discuss why or why not.

d) Using Excel, calculate the marginal revenue if Taco Del Mar increases its taco prices from the typical level. Hint: use a formula for marginal revenue and evaluate it at the “typical” price.


A1 ^X V fic Name(s): Dalila Han 1 Name(s): Dalila Han 2 Lab Set 3 Variable Parameter Value 4 5 Intercept 6 P (Price) 7 A (Advertising) 8Pop (Population) 9 Pc (Competitor Price 10 12 13 a Revenue- 15 b Ep- 17 C 18 20 21 22 d 23 24 e 25 26 f 27 28 9 MR- 29 30 h 31 32 34 35 36

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