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problem 1: Below is a table with total data for a firm in a perfectly competitive industry.

875_competitive industry.jpg

a) What is the marginal cost and average total cost for the firm at each and every level of output?

b) If the prevailing market price is $34 per unit, how many units will be generated and sold? What are the profits per unit? What are total profits?

c) Is the industry in long run equilibrium at this price? If not, what do you expect to occur to price over time?

problem 2: The widget industry is perfectly competitive. The industry demand and supply functions for widgets are shown below.

Qd = 424 – 40P
Qs  = 40 +   8P

a) What is the equilibrium price and quantity for industry?

b) If the government establishes a price floor of $9, describe what will result in terms of excess demand or supply.

c) If the government establishes a price ceiling of $6, describe what will outcome in terms of excess demand or supply.

problem 3: Jones Company operates in a monopolistically competitive industry. The estimated demand for its products is given by the given inverse demand function:

P = 1760 – 12Q

It finance department has estimated its total cost function as:

TC = 24,000 + 5 Q – 15 Q2 + 0.333 Q3

a) What is the effect of a raise in fixed costs of $5000 on equilibrium price and output?

problem 4
: Smith Corp. has found out that its contribution margin, (P – MC)/P, is 40%. The recent market research study found the given relationship among adverting outlays and sales revenue.

704_profit maximizing.jpg

a) What is the profit maximizing level of advertising? Describe.

Microeconomics, Economics

  • Category:- Microeconomics
  • Reference No.:- M91478

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