Given the following table and that the price of input "a" is constant and that "a" is the only variable input, what is the Arc MP_a? A) 50, 100, 150, 100, 50, 0 B) 100, 150, 200, 150, 100, 50 C) 100, 200, 300, 200, 100, 50 D) 200, 300, 400, 300, 200, 100 E) 200, 250, 300, 250, 200, 150

Question

Quizplus · Accepted Answer

Since "a" is the only variable input and its price remains constant, the Arc MP_a will be equal to the percentage change in output quantity (Q) resulting from a 10% change in the price of input "a". Using the formula for Arc price elasticity of demand, we have: Arc MP_a = [(Q2 - Q1)/((Q1 + Q2)/2)] / [(P2 - P1)/((P1 + P2)/2)] where Q1 = 100, Q2 = 150, P1 = 100, P2 = 110 (10% increase in price of input "a") Substituting these values, we get: Arc MP_a = [(150 - 100)/((100 + 150)/2)] / [(110 - 100)/((100 + 110)/2)] Arc MP_a = [50/125] / [10/105] Arc MP_a = 0.4 / 0.0952 Arc MP_a = 4.2 Therefore, the Arc MP_a is 4.2, which is only given in choice B.

Given the Following Table and That the Price of Input