The table above gives the demand schedule for museum visits
a. You, as the resident economist, have been given the task of maximizing the museum's total revenue. What admission price should you charge?
b. What is the elasticity of demand between $6 and $4?
c. Moving along the demand schedule from $10 to $8 to $6 and ultimately to $4, how does the price elasticity of demand change in size?
a. The admission price you should charge is $6. The total number of visits will be 300,000 and total revenue is $6 × 300,000 = $1,800,000. No other price gives you this much total revenue.
b. The price elasticity of demand equals [(300 visits - 400 visits) ÷ 350 visits] ÷ [($6 - $4 ) ÷ $5] =
(0.29 ) ÷ (0.4 ) = 0.71.
c. Moving along the demand schedule to lower prices, the elasticity of demand falls in size.
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An economy is not able to develop because of a lack of capital. Which of the following strategies would you suggest this economy pursue?
A. nationalize private enterprises because the government sector is not motivated by profit maximization B. lower interest rates C. impose quotas on how much capital can be imported from other countries to reduce dependency on foreign capital D. increase the political stability of the economy