Ask Question, Ask an Expert

+61-413 786 465

info@mywordsolution.com

Ask Microeconomics Expert

problem: Cost

a) Complete the given table:

958_cost table.jpg

b) Draw one graph of ATC, AVC and MC. Draw other graph with TC.

c) What happens to ATC as Q increases?

d) Where does MC cross AVC? ATC?

e) Assume that fixed costs increase by $20.  How will this influence TFC, TVC, TC, ATC, AVC and MC? Which numbers change and which stay similar?

f) Assume that raw material prices increase by 20%.  How will this influence TFC, TVC, TC, ATC, AVC and MC?

problem: Perfect Competition

a) What does it signify for a market to be perfectly competitive? What are the three conditions of perfect competition?  What does it signify for firms to be ‘price takers’?

b) Let’s focus on just the per unit information from the table in problem #1. Complete the table.

1890_perfect competition table.jpg

c) Assume that the market price of this product is $57. How much would a profit maximizing firm choose to produce?  Compute profits or losses.

Please note there are two ways to find the right answer to these problems. The tough way is to compute total revenue, total cost and profit for each possible quantity and then pick the Q that yields the maximum profit.

The simple way is to use marginal analysis. As I’m going to ask you to do this several more times with different prices, I propose you figure out the simple way.

468_profit or loss.jpg

d) How high does the price require being for firms to be able to make a profit? This is the long run shutdown price – if a firm can’t make a profit it will shutdown at certain point.

e) How low can the price go before a firm will shut down instantly?

f) Now let’s scale up from 1 firm to many firms. Assume that there are 500 identical firms competing in this industry.  Complete the table (it is really a supply schedule).

255_quantity supplied.jpg

g) Graph the industry supply curve with Q on the horizontal and P on the vertical.

h) Take the given data on demand and add up it to your graph. Find the equilibrium price in this market.

83_equillibrium market.jpg

i) How are firms doing at the equilibrium price? Are they earning profits or losing money? Do you expect the number of firms to mount or drop in this industry?

problem: Monopoly.

Use all the information on costs from problem #1, but now our firm has gained a monopoly and is the only seller for this product. Use the information in this table on demand, altogether with info on costs to answer the problems.

a) Complete the table.

2278_monopoly table.jpg

b) Graph Demand, MC, and MR.

c) How much will a profit maximizing monopolist choose to produce? What price will they charge? Compute firm profits at this level of output.

d) What would happen if the monopolist produced one more unit? What would the cost of producing the next unit be?  How much could the monopolist sell the next unit for? Why won’t the monopolist generate this next unit?

e) Is the monopoly outcome proficient? Are there some units that pass a cost benefit test which aren’t being produced?  Show the dead-weight loss on your graph.

Microeconomics, Economics

  • Category:- Microeconomics
  • Reference No.:- M9204

Have any Question? 


Related Questions in Microeconomics

Question in an attempt to help the farm sector congress has

Question: In an attempt to help the farm sector, Congress has several times passed legislation initiating and then extending the requirement that ethanol be blended with gasoline sold at the pump in many states. Because ...

Question in recent years labor costs in korea have been

Question: In recent years, labor costs in Korea have been rising about 10% faster than in the US. To what extent did this contribute to the devaluation of the won in 1997? If this trend continues, would you expect furthe ...

Question select a specific health care organization and

Question: Select a specific health care organization and identify its mission statement. As the leader of the HR department, you have been asked to deliver an orientation presentation to new employees to introduce the or ...

Question describe how might the three trends mentioned in

Question: Describe how might the three trends mentioned in Article (WSJ) Burberry, Richemont Sales Violin in Hong Kong, Paris, and actions by the IMF of organization in Article (WSJ) IMF Cuts 2016 Global Economic Growth ...

Question the export-import bank helps boeing by providing

Question: The Export-Import Bank helps Boeing by providing various subsides on aircraft sold to foreign countries. Boeing says it needs this help to offset subsidies given to Airbus Industrie by European governments, and ...

Question assume that the velocity of money is constant and

Question: Assume that the velocity of money is constant and real GDP growth is 2.5%. Janet Yellen and the Fed are targeting a 2% inflation rate. What is the target growth rate in the money supply? How much new money need ...

Question there are three industrial firms in happy

Question: There are three industrial firms in Happy Valley: Firm A- Pollution Level=70 Units Cost to reduce Pollution=$20/Unit Firm B- Pollution Level=80 Unites Cost to reduce Pollution= $25/Unit Firm C- Pollution Level= ...

Question in early 1975 the government distributed 8 billion

Question: In early 1975, the government distributed $8 billion in one-time tax rebates to try to move the economy out of its most severe post-WWII recession. What impact do you think this had on consumption and saving? I ...

Question - price elasticity cross-price elasticity and

Question - Price Elasticity, Cross-Price Elasticity, and Income Elasticity in the Market for Alcoholic Beverages Many public policy issues are related to the consumption of alcoholic beverages. These issues include under ...

Question with walmarts success many other stores such as

Question: With WalMart's success, many other stores such as Target, Macy's and Walgreen's decided to implement this strategy and create their own brands. Many consumers opt for these products because they believe that th ...

  • 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