Seafood restaurant in the beach resort town has a fixed (necessary) cost of $1,000 per month and variable (avoidable) costs of another $1,000 for each month. Its total revenues over the six warm months amount to $17,000, so that its profit for this period is $5,000. Its total revenues over other six cold months are only $7,000, but, so that it loses $5,000 over those months and just breaks even over the year as a entire. Wouldn’t the restaurant do better by staying closed out of the season?
Assume a firm’s costs are C(q) = 100 + 10q − 6q2 + 3q3. At what price will it fold up, given that all its fixed costs are sunk?
The inverse market demand curve for the good is p = 100 − 0.25Q. The inverse market supply curve for good is p = 20 + 0.55Q. Compute the equilibrium price and quantity, producer surplus, and consumer surplus.
A market is supplied competitively through 50 low-cost firms, each with cost curve Cl(q) = 350 + 2q + q2, and n high-cost firms, each with cost curve Ch(q) = 400 + 2q + q2. Market demand is Q = 2500 − 10p. If none of high-cost firms makes the positive profit, how large is n? How much profit do low-cost firms make?
Assume the government desires to restrict the number of cars by issuing the limited number of marketable permits to manufacture cars. The inverse market demand curve for the cars is p = 20,000 − 0.9Q, the marginal cost of the manufacturing cars is constant at $4,600, and the marginal pollution and congestion cost of cars is E(Q) = 400 + 0.1Q. What is the socially optimal output of the cars? At what price would marketable allows producing that number of cars trade?