Answered: Figure 16-2 Price 90 A MC 85 80 ATC 75…

Figure 16-2 Price 90 A MC 85 80 ATC 75 70 65 6 60 55 50 45 D 40 35 30 25 20 15 10 MR O 17 34 51 68 85 102 119 136 153 170 187 204 221 238 255 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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11. Problems and Applications Q11 Suppose that each firm in a competitive industry has the following costs: Total Cost: TC = 50 + q? Marginal Cost: MC = q where q is an individual firm's quantity produced. The market demand curve for this product is: Demand Qp = 120 – P where P is the price and Q is the total quantity of the good. Each firm's fixed cost is $ What is each firm's variable cost? 50 + 9
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$150 $145 $140 MC $135 $130 $125 $120 $115 ATC $110 $105 $100 $95 $90 $85 $80 AVC $75 $70 $65 $60 $55 $50 $45 $40 $35 $30 $25 0 1 2 3 5 6 Quantity Produced 7 8 9 10 11 The graph above shows the cost functions for a perfectly competitive profit maximizing firm. If the market price of the product is $70 per unit, the firm will produce units, will cover make an economic profit of dollars. dollars of its fixed cost, and will
Use the figure below to answer the following questions. Price and cost (dollars per unit) 100 90 85 80 70 55 40 0 MR₂ MC ATC La MR₁ 100 140 200 220 250 Quantity (units per week) Figure 13.2.3 Refer to Figure 13.2.3. Assume this firm faces demand curve D2. If the firm produces the efficient quantity, it makes zero economic profit. makes an economic profit. will face competition from new firms entering the industry. is in a long-run equilibrium. incurs an economic loss.
8. Short-run and long run effects of a shift in demand Suppose that the tuna industry is in long-run equilibrium at a price of $5 per can of tuna and a quantity of 350 million cans per year. Suppose that WebMD daims that a protein found in tuna will increase your expected lifespan by 2 years. WebMD's claim will cause consumers to demand more PRICE (Dollars per cani producing more tuna and earning positive profit Shift the demand curve, the supply curve, or both on the following graph to illustrate these short-run effects of WebMD's claim. ? 0 tuna at every price. In the short run, firms will respond by Supply Demand 70 140 210 200 350 420 400 560 630 700 QUANTITY (Millions of cans) Demand -0 Supply
3. Profit maximization using total cost and total revenue curves Suppose Iyana operates a handicraft pop-up retail shop that sells cardigans. Assume a perfectly competitive market structure for cardigans with a market price equal to $25 per cardigan. The following graph shows Iyana's total cost curve. Use the blue points (circle symbol) to plot total revenue and the green points (triangle symbol) to plot profit for cardigans for quantities zero through seven (including zero and seven) that Iyana produces. TOTAL COST AND REVENUE (Dollars) 200 175 150 125 100 75 50 25 0 -25 D 4 5 QUANTITY (Cardigans) Total Cost 6 Total Revenue A Profit
1. If a product sells at a price of $16 in a purely competitive market and faces the marginal cost data shown below, what is the profit maximizing/loss minimizing level of output? Output 0 1 2 3 4 5 Marginal Cost $10 9 13 17 21
1.0 - If the demand forApple Cinnamon Cheerios decreases at all prices, what will happen to thedemand curve? Show the shift in the demand curve on the same diagram and explain what happensto the firm’s output and profits.
7. Short-run supply and long-run equilibrium Consider the competitive market for ruthenium. Assume that no matter how many firms operate in the industry, every firm is identical and faces the same marginal cost (MC), average total cost (ATC), and average variable cost (AVC) curves plotted in the following graph. COSTS (Dollars per pound) 100 90 80 70 40 30 20 10 0 0 MC D 5 10 ATC 15, 15 AVC ☐ 15 20 25 30 35 QUANTITY (Thousands of pounds) 40 + 45 50 The following graph plots the market demand curve for ruthenium. (?)
3. Profit maximization using total cost and total revenue curves Suppose Latasha runs a small business that manufactures teddy bears. Assume that the market for teddy bears is a competitive market, and the market price is $20 per teddy bear. The following graph shows Latasha's total cost curve. Use the blue points (circle symbol) to plot total revenue and the green points (triangle symbol) to plot profit for teddy bears quantities zero through seven (inclusive) that Latasha produces.
Calculate Jacques's marginal revenue and marginal cost for the first seven teddy bears he produces, and plot them on the following graph. Use the blue points (circle symbol) to plot marginal revenue and the orange points (square symbol) to plot marginal cost. 40 35 Marginal Revenue 30 25 Marginal Cost 20 15 10 2 3 4 5 7 8 QUANTITY (Teddy bears) Jacques's profit is maximized when he produces , which is teddy bears. When he does this, the marginal cost of the last teddy bear he produces is than the price Jacques receives for each teddy bear he sells. The marginal cost of producing an additional teddy bear (that is, one more teddy bear than would maximize his profit) is s , which is than the price Jacques receives for each teddy bear he sells. Therefore, Jacques's profit-maximizing quantity corresponds to the intersection of the curves. Because Jacques is a price taker, this last condition can also be written as COSTS AND REVENUE (Dollars per teddy bear)