Consider the market represented by the figure to the right. Suppose this market has one firm. If the firm can only charge a single price, what is this firm's profits (when maximizing profits)? The figure to the right assumes the firm has no fixed costs. a) Correspondingly, remaining surplus available to consumers is Now suppose the firm is able to capture all consumer surplus by charging different prices to b) The firm now earns profits of $? $ per unit 100.00 90.00 80.00 70.00- 60.00- 50.00 40.00 30.00 20.00- 10.00- 0.00+ 0 MC=ATC MR D 10 20 30 40 50 60 70 80 90 100 Quantity

Consider the market represented by the figure to the right. Suppose this market has one firm. If the firm can only charge a single price, what is this firm's profits (when maximizing profits)? The figure to the right assumes the firm has no fixed costs. a) Correspondingly, remaining surplus available to consumers is Now suppose the firm is able to capture all consumer surplus by charging different prices to b) The firm now earns profits of $? $ per unit 100.00 90.00 80.00 70.00- 60.00- 50.00 40.00 30.00 20.00- 10.00- 0.00+ 0 MC=ATC MR D 10 20 30 40 50 60 70 80 90 100 Quantity

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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When are Consumer and Producer Surplus at a maximum? A) When a market is in equilibrium B) When productive resources are most efficiently utilized C) When resources are best allocated to consumers D) All of the above
Example 2: In fall of 2011, the National Christmas Tree Association decided to impose a fee/tax of $0.15 per tree sold.² They claimed the tax revenue raised would fund a new marketing campaign for Christmas tree growers in response to growing plastic tree imports. The proposal quickly drew controversy: some argued that the fee/tax would be passed along in higher prices to consumers, but the National Christmas Tree Association says no. How does the answer to this question depend on the assumption about the price elasticity of demand? a. Consider two graphs of the market for Christmas trees. The supply curve in each market is assumed to be the same. In the left graph, assume the price elasticity of demand is relatively inelastic and in the right graph, assume the price elasticity of demand is relatively elastic. Add labels on your diagram to identify the equilibrium price and quantity of trees before the tax. b. Now, suppose retailers are assessed a tax of amount for each tree sold.…
Suppose that the market for cigarettes is initially in equilibrium and is perfectly competitive. The demand curve can be expressed as P = 60 - Qd; the supply curve can be expressed as P = 0.5Qs. Quantity is expressed in millions of boxes per month. Now suppose that the federal government imposes a production quota on cigarettes of 30 million boxes per month. What is the change in producer surplus (per million boxes) associated with the quota? $175 $75 $25 $50
Instructions: Answer to the best of your ability. Show all of your work, the details, excel tab. The Market for Good X is perfectly competitive, with market supply and own-price demand curves given as q_s=-25000 + 3000p q_d=135000-5000p a. Determine the equilibrium price and quantity in the market for good x. (Note: You are not anlayzing an individual firm here. You are analyzing the entire market). Suppose the individual firm's average total costs are dfined by TC=1/3q^3-3q^2+28q+2 b. What is the firm's demand curve (don't give me back the industry demand curve. The firm's demand curve is what I want.) c. find the profit maximizing level of output for the firm (I've given the marginal cost curve below). MC=q^2-6q+28 d. If this firm is making a profit (loss) how much is the profit (loss)?
Consider the market for bicycles in the fictional province of Westvale. The market demand function for bicycles is given by P=300-2Q. The marginal cost curve for firms in this market is given by P=40+Q. Prices are measured in dollars. a) Under a competitive market equilibrium, what is the price of a bicycle? b) How many bicycles are produced under a competitive market equilibrium? c) Calculate consumer surplus, producer surplus, and total surplus under the competitive market equilibrium Suppose that the firms that were once competing in this market merge into one single firm, forming a monopoly. This monopoly has a marginal revenue function of P=300-4Q. d) What price does this monopolist charge? e) How many bicycles does the monopolist produce? f) Calculate consumer surplus, producer surplus, and total surplus under the monopolistic market outcome g) How much deadweight loss resulted from the creation of the monopolist?
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question B
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