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Given the monopolistic competitve firm output, marginal cost, marginal revenue & average variable cost.

A monopolistically competitive firm is producing 50 units of output in the short run where marginal cost is $3.00, average total costs are $5.00, price is $4.50, average variable cost is $4.00, and marginal revenue is $3.00. How much profit is the firm making? What output recommendation would you make for the firm? r? ~ n-p? class=MsoNormal style='margin-top:3.0pt;margin-right:0in;margin-bottom:3.0pt; margin-left:0in;text-align:justify;line-height:150%;mso-pagination:none'>1. Mitchell's money income is $150, the price of X is $2, and the price of Y is $2. Given these prices and income, Mitchell buys 50 units of X and 25 units of Y. Call this combination of X and Y bundle J. At bundle J Mitchell's MRS is 2. At bundle J, if Mitchell increases consumption of Y by 1 unit how many units of X can he give up and still reach the same level of utility?

a) ½.

b) 1.

c) 2.

d) 4.

2. Over the past decade medical price have rise more rapidly than other prices. In order to rising medical costs have affected customer alternatives, let X represent the quantity of medical services, and let Y represent the quantity of other goods. Furthermore, let income (M) be measured in hundreds of dollars, the price of medical services and other goods in terms of dollars per minute, with M =100, Px =4, and Py = 5.

a) Graph the budget line, and determine the market rate of substitution.

b) Illustrate the budget set.

c) Show in your graph what happens to the budget constraint if Px increases to $10.

d) What is the meaning of the slope of the two budget constraints?

Business Economics, Economics

  • Category:- Business Economics
  • Reference No.:- M917799

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