. The demand for imported Honda automobiles is given by the following equation: QH = 1200...

. The demand for imported Honda automobiles is given by the following equation:

QH = 1200 – 20PH + 10PC + 200PG

The price of Hondas, PH = 60, the price of Chevrolets, PC = 70, and the price of gasoline, PG = 1.5.

(a) Calculate the point elasticity of demand for Hondas with respect to its own price, the price of

Chevrolets, and the price of gasoline.

(b) For each of Chevrolets and gasoline, is it a substitute or complement for Hondas?

(c) Calculate consumer surplus at the revenue-maximizing price for Hondas.

(d) If the cost per Honda is 50 and the Honda importing agency behaves as a monopolist, how

many will be imported and at what price will they sell?

(e) Redo part (d) on the assumption gasoline price rises to PG = 2.5.

Expert Solution

Rahul Sunny answered 2 years ago

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