1.

Given the demand curve,

P = 20-0.5Q

Where P is the dollar price per unit and Q is the number of units sold per month and Q must be 2 or more.

a. Write the expression for this firm's Total Revenue (TR)

b. Write the expression forthis firm's marginal revenue (MR).

c. What is Q when the MR is zero?

d. What is P when the own-price elasticity is one?

e. If MC=$10 what is the profit maximizing level of Q and P?

f. If the price falls by 10% from your answer in e., will TR rise or fall?

2.

PL = $1, PK = $9, K is a fixed input

L Q TFC AFC TVC AVC TC ATC MC

0 0 ___ -X- ___ ___ ___ -X-
___
1 1 ___ ___ ___ ___ ___ ___
___
3 2 ___ ___ ___ ___ ___ ___
___
7 3 ___ ___ ___ ___ ___ ___
___
15 4 ___ ___ ___ ___ ___ ___
___
29 5 ___ ___ ___ ___ ___ ____
___
51 6 ___ ___ ___ ___ ___ ____

a. Complete the above-given table.

b. Over what interval of Q is ATC minimized?

c. At minimum ATC, what is the approximate average cost of producing Q?

d. If the above-mentioned firm shut down (does not operate), what loss would it bear?

e. If the price of output (Q) is $14/unit, (1) Will this firm operate?

(2) What is the profit maximizing (or loss minimizing) level of output?

(3) What is the firm's profit (loss)?

(4) If there are no barriers to entry/exit, what will be the price of output in this industry in the long run, if the cost structure for all firms is the same as this firm and the industry is characterized by constant LRATC. Also assume that this firm is currently operating on its LRATC function.

(5) In the long run, what will this firm's economic profit be?

3. Given the cost function of a perfectly competitive firm,

TC = 200 + 4Q + 2Q2

and P (price of output) = $10

a. What is the profit maximizing level of Output?

b. What is Total Cost when profit is maximized?

c. What is Total Revenue when profit is maximized?

d. What is Total Profit when profit is maximized?