### Economic Problem-Solving**Marginal Cost Curve Analysis**7. Assume that the marginal cost curve is given by $ mc(q) = 100 + 2q $.#### (a) Price and Optimal ProductionIf the price is $160, what is the optimal production for the firm? What if the price is $120? (Ignore the shut-down decision for this part)#### (b) Market Clearing and Firm CountAssuming that the market is cleared at $160 (no shortage/surplus). If the market demand is equal to 10,000 units of the product, how many firms are currently operating ($n$) in the market? (Hint: if the market clears $q^d = n \times q^s$)#### (c) Average Total Cost and Break-even PriceIf the total cost curve is $ TC = 256 + 100q + q^2 $, what's the average total cost curve? What’s the break-even price?#### (d) Long-run EquilibriumIf the demand curve is given by $ q^d = 8,452 - p $, what’s the long-run equilibrium price, the equilibrium quantity, and the long-run total number of firms ($ n $) in the industry?### Explanation of Formulas and Concepts- **Marginal Cost (MC)**: It is the increase in total cost that arises from producing an additional unit of output. It is derived from the total cost curve and is crucial for determining optimal production levels. - **Market Clearing**: This happens when the quantity supplied equals the quantity demanded, resulting in no surplus or shortage in the market.- **Average Total Cost (ATC)**: It is the total cost divided by the quantity produced, which helps to determine the pricing needed to cover costs.- **Break-even Price**: This is the price at which total revenue equals total costs, resulting in no economic profit or loss.#### Diagram and Graph AnalysisWhile the original text did not include diagrams or graphs, an effective way to understand this content involves visualizing:- **MC Curve**: Plotting $ mc(q) = 100 + 2q $ shows how marginal costs increase with production.- **ATC Curve**: Derived from the total cost formula $ TC = 256 + 100q + q^2 $. The average total cost can be graphed to show how costs per

7. Assume that the marginal cost curve is given by mc(q) = 100 + 2q. (a) If the price is $160, what is the optimal production for the firm? What if the price is $120? (ignore the shut-down decision for this part) (b) Assuming that the market is cleared at $160 (no shortage/surplus). If the market demand is equal to 10, 000 units of the product. How many firms are currently operating (n) in the market? (Hint: if the market clears qd = n x q°) (c) If the total cost curve is TC = 256 + 100g + q², what’s the average total cost curve? what's the break-even price? (d) If the demand curve is given by qd = 8, 452 - P, what's the long-run equilibrium price, the equilibrium quantity and the long-run total number of firms (n) in the industry?

7. Assume that the marginal cost curve is given by mc(q) = 100 + 2q. (a) If the price is $160, what is the optimal production for the firm? What if the price is $120? (ignore the shut-down decision for this part) (b) Assuming that the market is cleared at $160 (no shortage/surplus). If the market demand is equal to 10, 000 units of the product. How many firms are currently operating (n) in the market? (Hint: if the market clears qd = n x q°) (c) If the total cost curve is TC = 256 + 100g + q², what’s the average total cost curve? what's the break-even price? (d) If the demand curve is given by qd = 8, 452 - P, what's the long-run equilibrium price, the equilibrium quantity and the long-run total number of firms (n) in the industry?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Similar questions

3. Suppose the production function of a firm is given by f (x1, x2) = min {x1, x2}. (a) Calculate the conditional demand functions of the firm assuming w₁ = 2, w2 = 4, and y = 8. (b) Calculate the minimum cost of the firm to produce 8 units of the good when w₁ = 2 and w2 = 4.
A movie theater shows films for a community of 10000 people. Right now, the price per ticket is $17.50. In the past, when they increased or decreased the price per ticket, they discovered that for every dollar (or fraction) that the price was increased or decreased, the attendance decreased or increased proportionally by 200 people. The theater owner pays the Film Distribution Company $10 (incremental cost) in royalties per person whoviews the film. Find a. The willingness to pay distribution of the movie goers. b. The average price they would be willing to pay. c. The price per ticket that maximizes revenue. d. Should the theater owner increase or decrease the price per ticket if she wants to maximize contribution? e. Find the consumer surplus if the tickets are priced at the price that maximizes contribution. Please complete in excel showing formulas on how it was completed
1. Suppose you are the owner of a burger restaurant that has a cost of production given by C = 400 + 0.02q^2 where q is the number of burgers produced per day. Assume that the market for burgers is perfectly competitive. a. If the market price for a burger is $10, how many burgers should the manager plan to produce in a day? b. What is the profit level? Is this the maximum profit that the restaurant can make per day? c. What output will the firm produce if the price of a burger goes down to $8?
Suppose that the market for microwave ovens is a competitive market. The following graph shows the daily cost curves of a firm operating in this market. PRICE (Dollars per oven) 100 90 80 70 40 30 20 10 0 0 5 0 MC ATC AVC 10 15 20 25 30 35 QUANTITY (Thousands of ovens) 40 45 50 (?)
The table below shows the weekly marginal cost (MC) and average total cost (ATC) for Buddies, a purely competitive firm that produces novelty ear buds. Assume the market for novelty ear buds is a competitive market and that the price of ear buds is $6.00 per pair. Buddies Production Costs Quantity MC ATC of Ear Buds ($) ($) 25 2.20 30 2.02 2.17 35 2.45 2.21 40 3.57 2.38 45 4.00 2.56 50 5.46 2.85 55 5.93 3.13 60 8.53 3.58 Instructions: In part a, enter your answer as the closest given whole number. In parts b-d, round your answers to two decimal places. a. If Buddies wants to maximize profits, how many pairs of ear buds should it produce each week? pairs b. At the profit-maximizing quantity, what is the total cost of producing ear buds?
A firm produces two different kinds A and B of a commodity.The daily cost of producing x units of A and y units of B is C(x,y)=20(x^2+xy+y^2).Suppose that the firm sells all at a price per unit of 240 for A and 180 for B. 1)find the daily production level that maximizes profit and confirm its maximum. 2)Suppose the firm is required to produce exactly 5 units in all.what are now the optimal production level of x and y.
A7 You are the manager of a bakery that produces and packages gourmet muffins, and you currently sell muffins in packages of 3. A consultant’s report has estimated the (inverse) demand of a typical consumer to: P = 3 − 0.5Q If your cost of producing bran muffins is C(Q) = Q: (a) What is the marginal cost of muffins? (b) Draw the demand and marginal cost on a diagram. (c) Determine the optimal number of muffins to sell in a single package. (d) What price should the firm charge for each park?
See image for question with sub-parts.
a) Find the long run equilibrium price. Find the minimum efficient scale of the typical firm. Find the typical firm’s average cost when it operates at minimum efficient scale. In the long run, what price will prevail in this market? In words, clearly justify your answer. Suppose demand is QD = 3,200 – 100P. (b) Explain why you expect the number of firms in this market to be fifty-five. In this market, what is the short run supply function of the typical firm? What is the short run market supply function? Suppose the local government introduced a $90 licensing fee that raised the fixed cost from $160 to $250. c) Would the introduction of the licensing fee affect the short run equilibrium price or quantity? Justify your answer? Clearly explain why you expect that in the long run fewer larger firms will operate in this market. After the introduction of the licensing fee, what is the new long run equilibrium price? How many firms will survive in this market?
1) What is the maximum profit available to this firm? 2) If the firm finds that its marginal cost is $11, what is the decision of the firm?
8. A commodity has price demand function p(x)= 11800 - .01x and each unit costs 1000 and the overhead is 5000. a) what is the revenue function, cost function and profit function ? b) what price should be charged to maximize profits? c) what is the marginal profit for x=400 ? Explain what this marginal profit number means.
Each firm in a perfectly competetive market has a long-run total cost of LRTC = 100g – 10q + 100. The market demand is Q* = 2150 – 5P. At the long-run equilibrium price, how many firms will there be in the market? (а) 500 (b) 1,000 (c) 1,200 (d) 2,000 (e) 2,400