(1) Calculate the price elasticity of demand for the following demand functions:
(a) Q = 5 - ln(P) for P=8
(b) Q = 2000 - 0.5P3 for P=15
(c) Q = (12-P)^2 for P=10
(d) P= 2/Q for P=1
(2) Advertising:
Assume a firm's advertising elasticity is known to be 0.8.
The firm's demand function is given by Q=100 - 2P. The firm charges a price of
P=$3.50 for its product. Calculate the profit maximizing level of advertising per sale.
(3) How does the "rule of thumb" for the profit maximizing advertising per sale level
change if MC is equal to zero. Provide the new equation and explain!