Ask Microeconomics Expert

Question 1. Consider the market for bikes. Suppose it is a perfectly competitive market. The market demand for bikes is given by the equation PD (Q)=110 - 5Q and the market supply for bikes is given by the equation Ps (Q).5 + 2Q.

A firm faces costs given by the total cost function TC(Q)=2.5Q2 +130 . Its marginal cost curve is given by MC(Q) = 5Q .

(a)  What is the profit-maximizing quantity for this firm?

(b)  What profit/loss does the firm earn (specify if it is a profit or loss)?

(c)  What are the fixed costs for this firm?

(d)  What should this firm do in the short-run? Explain.

(e)  Suppose the fixed costs of the firm decreased, what would happen to the profit-maximizing quantity? Clearly explain your reasoning.

Question 2. Consider the market for scooters. Suppose it is a (single-price) monopolistic market. The market demand for scooters is given by the equation PD (Q) =100 -8Q . The firm faces costs given by the total cost function TC(Q) = 3Q2 + 34Q +10 and marginal cost functionMC(Q). 6Q+ 34.

(a)  Draw the firm's problem. Your graph should include (ATC, MC, MR, D).

(b)  Calculate the profit maximizing quantity of this firm. Show it on your graph.

(c)  What profit does the firm earn?

(d)  Calculate the deadweight loss generated by this monopoly.

Question 3. Suppose that a monopoly faces a demand curve P = 30 - 2Q and its marginal cost curve is MC =Q

(a)  Plot the average revenue, marginal revenue and marginal cost curves for this monopoly.

(b)  Find the profit maximizing price and output for this monopoly.

(c)  Find the consumer surplus, the producer surplus, the total surplus and the deadweight loss in the (monopolized) market.

(d)  Find the competitive price and quantity (as if the above marginal cost curve represents the market supply curve).

(e)  Find the consumer surplus, the producer surplus and total surplus in the competitive market.

(f)   Plot a graph on which you illustrate the monopoly equilibrium, the competitive equilibrium and the deadweight loss due to the monopoly.

Question 4. Suppose that Kerasotes Crown Village Theaters Cinema is a local monopoly. It estimated the following demand curves for different groups of customers:

Adults

P =12

- 2Q

Children

P = 8

- 3Q

Students

P =10

- 4Q

The marginal cost of the cinema is $2 per customer.

(a) What is the marginal revenue in each submarket?

(b) What price should the cinema charge in each of the submarkets if its goal is to maximize profits?

Question 5. The following table shows the profits of two producers of pancakes for various combinations of prices that each firm might charge.

                                                                               Aunt Jemima

 

 

Hungry Jack

 

 

$1

$2

$3

$4

$1

20, 40

25, 50

30, 40 

35, 30

$2

25, 50

30, 60

35, 50

40, 40

$3

30, 60

35, 70

30, 60

45, 50

$4

25, 70

30, 80

40, 75

35, 70

a. Does "Hungry Jack" have a dominant strategy? f he does, find it.

b. Does "Aunt Jemima" have a dominant strategy? If she does, find it.

c. In this game there is a unique Nash equilibrium (in pure strategies). Find it and prove that it is indeed Nash equilibrium.

d. Choose one outcome other than the Nash equilibrium and show why it is not Nash equilibrium.

e. Is the Nash equilibrium in this game Pareto optimal? Prove your answer.

Microeconomics, Economics

  • Category:- Microeconomics
  • Reference No.:- M91224068
  • Price:- $45

Priced at Now at $45, Verified Solution

Have any Question?


Related Questions in Microeconomics

Question show the market for cigarettes in equilibrium

Question: Show the market for cigarettes in equilibrium, assuming that there are no laws banning smoking in public. Label the equilibrium private market price and quantity as Pm and Qm. Add whatever is needed to the mode ...

Question recycling is a relatively inexpensive solution to

Question: Recycling is a relatively inexpensive solution to much of the environmental contamination from plastics, glass, and other waste materials. Is it a sound policy to make it mandatory for everybody to recycle? The ...

Question consider two ways of protecting elephants from

Question: Consider two ways of protecting elephants from poachers in African countries. In one approach, the government sets up enormous national parks that have sufficient habitat for elephants to thrive and forbids all ...

Question suppose you want to put a dollar value on the

Question: Suppose you want to put a dollar value on the external costs of carbon emissions from a power plant. What information or data would you obtain to measure the external [not social] cost? The response must be typ ...

Question in the tradeoff between economic output and

Question: In the tradeoff between economic output and environmental protection, what do the combinations on the protection possibility curve represent? The response must be typed, single spaced, must be in times new roma ...

Question consider the case of global environmental problems

Question: Consider the case of global environmental problems that spill across international borders as a prisoner's dilemma of the sort studied in Monopolistic Competition and Oligopoly. Say that there are two countries ...

Question consider two approaches to reducing emissions of

Question: Consider two approaches to reducing emissions of CO2 into the environment from manufacturing industries in the United States. In the first approach, the U.S. government makes it a policy to use only predetermin ...

Question the state of colorado requires oil and gas

Question: The state of Colorado requires oil and gas companies who use fracking techniques to return the land to its original condition after the oil and gas extractions. Table 12.9 shows the total cost and total benefit ...

Question suppose a city releases 16 million gallons of raw

Question: Suppose a city releases 16 million gallons of raw sewage into a nearby lake. Table shows the total costs of cleaning up the sewage to different levels, together with the total benefits of doing so. (Benefits in ...

Question four firms called elm maple oak and cherry produce

Question: Four firms called Elm, Maple, Oak, and Cherry, produce wooden chairs. However, they also produce a great deal of garbage (a mixture of glue, varnish, sandpaper, and wood scraps). The first row of Table 12.6 sho ...

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

Why might a bank avoid the use of interest rate swaps even

Why might a bank avoid the use of interest rate swaps, even when the institution is exposed to significant interest rate

Describe the difference between zero coupon bonds and

Describe the difference between zero coupon bonds and coupon bonds. Under what conditions will a coupon bond sell at a p

Compute the present value of an annuity of 880 per year

Compute the present value of an annuity of $ 880 per year for 16 years, given a discount rate of 6 percent per annum. As

Compute the present value of an 1150 payment made in ten

Compute the present value of an $1,150 payment made in ten years when the discount rate is 12 percent. (Do not round int

Compute the present value of an annuity of 699 per year

Compute the present value of an annuity of $ 699 per year for 19 years, given a discount rate of 6 percent per annum. As