3. You have been retained by seven corporations to advise them on their future output and price decisions. These firms are listed on the chart below. Each firm is a pure monopoly and desires to maximize its profits or minimize its losses. Before making your recommendations, fill in as much of the incomplete data in the chart as possible. Although you may not be able to fill in every box, there are sufficient data in each case to recommend action that is in the best interest of the firm After you have analyzed each case, decide which statement below is the best course of action for the firm involved. Place the number of the statement in the answer column. Nonsense - the information is inconsistent and could not be correct. 1 This firm is in the correct position This firm should shut down because its revenue does not exceed variable cost This firm should reduce production and increase price. This firm should increase production and reduce price. 2. 3. 4. 5. Price Marginal Quantity Revenue Total Fixed Case Total Average Cost Marginal Cost Answer of Revenue Cost Cost output S1 25 S1.00 10,000 $2,000 $1.50 $1.00 Minimum 2 $5.00 $4.00 1,000 $4,000 Level S1.50 $2.00 10,000 $2.00 $2.00 $5.00 >M.R $5.00 $5.00 4,000 $8,000 $7,200 $2.00 6 $7.00 $4.00 2,000 $8.000 $3.00 Minimum $10,000 Declining 5,000 $9,000 level n 17
3. You have been retained by seven corporations to advise them on their future output and price decisions. These firms are listed on the chart below. Each firm is a pure monopoly and desires to maximize its profits or minimize its losses. Before making your recommendations, fill in as much of the incomplete data in the chart as possible. Although you may not be able to fill in every box, there are sufficient data in each case to recommend action that is in the best interest of the firm After you have analyzed each case, decide which statement below is the best course of action for the firm involved. Place the number of the statement in the answer column. Nonsense - the information is inconsistent and could not be correct. 1 This firm is in the correct position This firm should shut down because its revenue does not exceed variable cost This firm should reduce production and increase price. This firm should increase production and reduce price. 2. 3. 4. 5. Price Marginal Quantity Revenue Total Fixed Case Total Average Cost Marginal Cost Answer of Revenue Cost Cost output S1 25 S1.00 10,000 $2,000 $1.50 $1.00 Minimum 2 $5.00 $4.00 1,000 $4,000 Level S1.50 $2.00 10,000 $2.00 $2.00 $5.00 >M.R $5.00 $5.00 4,000 $8,000 $7,200 $2.00 6 $7.00 $4.00 2,000 $8.000 $3.00 Minimum $10,000 Declining 5,000 $9,000 level n 17
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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