2. The demand curve facing a competitive firm The following graph illustrates the market for small moving trucks in Bloomington, IN, during Indiana's fall move-in week. PRICE (Dollars per small truck) 100 90 X 80 70 60 50 40 30 20 10 0 Demand 0 1 3 6 7 8 QUANTITY (Hundreds of small trucks) 2 4 5 Supply 9 10 (?) Suppose that YouYeet is one of over a dozen competitive firms in the Bloomington area that offers moving truck rentals. Based on the preceding graph showing the weekly market demand and supply curves, the price YouYeet must take as given is $

2. The demand curve facing a competitive firm The following graph illustrates the market for small moving trucks in Bloomington, IN, during Indiana's fall move-in week. PRICE (Dollars per small truck) 100 90 X 80 70 60 50 40 30 20 10 0 Demand 0 1 3 6 7 8 QUANTITY (Hundreds of small trucks) 2 4 5 Supply 9 10 (?) Suppose that YouYeet is one of over a dozen competitive firms in the Bloomington area that offers moving truck rentals. Based on the preceding graph showing the weekly market demand and supply curves, the price YouYeet must take as given is $

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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3. Profit maximization in the cost-curve diagram Suppose that the market for frying pans is a competitive market. The following graph shows the daily cost curves of a firm operating in this market Hint: After placing the rectangle on the graph, you can select an endpoint to see the coordinates of that point. 100 90 Profit or Loss 80 70 ATC 60 50 40 30 AVC 20 MC 10 5 10 15 20 25 30 35 40 45 50 QUANTITY (Thousands of pans per day) In the short run, at a market price of $50 per pan, this firm will choose to produce 37,500 pans per day. PRICE (Dollars perpan)
3. The components of marginal revenue Sean's Fire Engines is the sole seller of fire engines in the fictional country of Pyrotania. Initially, Sean produced eight fire engines, but he has decided to increase production to nine fire engines. The following graph shows the demand curve Sean faces. As you can see, to sell the additional engine, Sean must lower his price from $80,000 to $60,000 per fire engine. Note that while Sean gains revenue from the additional engine he sells, he also loses revenue from the initial eight engines because he sells them all at the lower price. Use the purple rectangle (diamond symbols) to shade the area representing the revenue lost from the initial eight engines by selling at $60,000 rather than $80,000. Then use the green rectangle (triangle symbols) to shade the area representing the revenue gained from selling an additional engine at $60,000. PRICE (Thousands of dollars per fire engine) Sean 100 90 80 70 40 10 ++ 0 0 1 True + 2 False 3 4 5 QUANTITY…
4 The Competitive Equilibrium Model—Deriving Supply] Negar owns a trendy and sustainable shoe factory. The total cost of producing a given number of pairs of shoes is displayed in the table below. Assume Negar can only produce the integer quantities of pairs of shoes specified in the table. Number of pairs Total Cost 0 400 10 410 20 430 30 460 40 500 50 580 60 680 70 800 b. Draw the supply curve for Negar’s shoe factory. c. Suppose the wholesale market for shoes that sell to retail stores is competitive, with a market price of $10 per pair (i.e., $100 per 10 pairs). If Negar’s goal is to maximize profits, how many pairs will she choose to sell? d. What are Negar’s profits when she sells the number of pairs from (c) at the market price of $10? e. Calculate Negar’s producer surplus given the price and quantity from part (c). How does this compare to the profit calculated in part (d)?
3 Evaluate the demand curve of firms that operate in
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3. The components of marginal revenue Dmitri's Fire Engines is the sole seller of fire engines in the fictional country of Pyrotania. Initially, Dmitri produced four fire engines, but he has decided to increase production to five fire engines. The following graph shows the demand curve Dmitri faces. As you can see, to sell the additional engine, Dmitri must lower his price from $105,000 to $90,000 per fire engine. Note that although Dmitri gains revenue from the additional engine he sells, he also loses revenue from the initial four engines because he sells them all at the lower price. Use the purple rectangle (diamond symbols) to shade the area representing the revenue lost from the initial four engines by selling at $90,000 rather than $105,000. Then use the green rectangle (triangle symbols) to shade the area representing the revenue gained from selling an additional engine at $90,000. 150 135 Revenue Lo 120 Demand 105 80 Revenue Gained PRICE (Thousands of dollars per fe engine 228…
22. Suppose the firm in the figure below sets a uniform price for its product. Please show the steps. a. If the firm chooses to set a uniform price for its product, then the profit-maximizing price is $________ and ________ units will be sold. Under this uniform pricing policy, the maximum possible profit is $________. b. The maximum profit the firm could earn if the firm sells 2,000 units and is able to charge the demand price for every one of the 2,000 units it sells is $ ________. c. For the additional number of units sold by expanding output to 2,000 units (from the output level in part a), the consumer surplus that could be captured if it were possible to charge the demand price on every one of those units would amount to $________.
5. Profit maximization and shutting down in the short run The following graph plots daily cost curves for a firm operating in the competitive market for rompers. PRICE (Dollars per romper) 50 45 40 35 30 25 20 15 10 5 0 0 2 MC 27.50 45.00 4 ATC AVC 6 8 10 12 14 QUANTITY (Thousands of rompers) 16 Price Quantity (Dollars per romper) (Rompers) 12.50 18 20 Using the following table, for each price level, calculate the optimal quantity of units for the firm to produce. Using the data from the graph to determine the firm's total variable cost, calculate the profit or loss associated with producing that quantity. Assume that if the firm is indifferent between producing and shutting down, it will choose to produce. (Hint: Select purple points [diamond symbols] on the graph to receive exact average variable cost information.) ? Total Revenue (Dollars) Fixed Cost Variable Cost (Dollars) (Dollars) 135,000 135,000 135,000 Profit (Dollars) If the firm shuts down, it must incur its fixed costs (FC)…
6. Deriving the short-run supply curve Consider the competitive market for dress shirts. The following graph shows the marginal cost (MC), average total cost (ATC), and average variable cost (AVC) curves for a typical firm in the industry. COSTS (Dollars) PRICE (Dollars per shirt) 100 90 80 70 60 50 100 40 90 10 80 0 70 Price (Dollars per shirt) 60 50 20 10 0 0 For each price in the following table, use the graph to determine the number of shirts this firm would produce in order to maximize its profit. Assume that when the price is exactly equal to the average variable cost, the firm is indifferent between producing zero shirts and the profit- maximizing quantity. Also, indicate whether the firm will produce, shut down, or be indifferent between the two in the short run. Lastly, determine whether it will make a profit, suffer a loss, or break even at each price. 15 20 25 55 70 85 10 0 0 0 MC D ATC On the following graph, use the orange points (square symbol) to plot points along the…
2. The demand curve facing a competitive firm The following graph shows the daily market for large cardboard boxes in San Francisco. Attached the graph Ch 14 Homework Q2 Suppose that Falero is one of more than a hundred competitive firms in San Francisco that produce such cardboard boxes. Based on the preceding graph showing the daily market demand and supply curves, the price Falero must take as given is $ ________. Fill in the price and the total, marginal, and average revenue Falero earns when it produces 0, 1, 2, or 3 boxes each day. Quantity Price Total Revenue Marginal Revenue Average Revenue (Boxes) (Dollars per box) (Dollars) (Dollars) (Dollars 0 ? 0 – ? 1 ? ? ? ? 2 ? ? ? ? 3 ? ? ? The demand curve that Falero faces is identical to which of its other curves? Check all that apply. Marginal revenue curve Average revenue curve…
4. Study Questions and Problems #4 The market equilibrium price for wheat is $4 per bushel. On the following graph, use the green line (triangle symbol) to plot the marginal revenue curve for a typical wheat farmer. Use the orange line (square symbol) to plot the total revenue curve for this farmer. TOTAL REVENUE & MARGINAL REVENUE (Dollars per bushel) 10 9 9 1 2 3 4 6 6 7 8 9 10 QUANTITY (Bushels) Marginal Revenue Total Revenue ? True or False: Marginal revenue is the change in total revenue per bushel. In this case, $4 is the marginal revenue that remains constant and equal to price. True False