Heloise and Abelard produce letters in a perfectly competitive industry. Heloise is much better at it than Abelard: Onaverage, she produces letters for half of the cost of Abelard's.a. True or False: If Heloise and Abelard are both maximizing profit, the last letter that Heloise produces will costhalf as much as the last letter written by Abelard. Explain your answer.b. Suppose Heloise and Abelard both produce until their last letter costs them $5 to produce. True or False: Becausethe cost of their last letter is the same, nobody will earn any economic rent.

Let's tackle each problem:a. True. In a perfectly competitive market, each firm will produce up to…

Answered: Heloise and Abelard produce letters in…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Latoya runs a print shop that makes posters for large companies. It is a very competitive business. The market price is currently $1 per poster. She has fixed costs of $250. Her variable costs are $1,500 for the first thousand posters, $1,200 for the second thousand, and then $800 for each additional thousand posters. Instructions: Enter your answers rounded to two decimal places. a. What is her AFC per poster (not per thousand!) if she prints 1,000 posters? What if she prints 2,000 posters? What if she prints 10,000 posters? b. What is her ATC per poster if she prints 1,000? What if she prints 2,000? Check my work What if she prints 10,000? c. If the market price fell to 75 cents per poster, would there be any output level at which Latoya would not shut down production immediately? (Click to select)
The makers of Tylenol pain reliever do a lot of advertising and have very loyal customers. In contrast, the makers of generic acetaminophen do no advertising, and their customers shop only for the lowest price. Assume that the marginal costs of Tylenol and generic acetaminophen are the same and constant. a) Draw a diagram showing Tylenol's demand, marginal revenue and marginal cost curves. Label Tylenol's price and mark-up over marginal cost. b) Repeat part (a) for a producer of generic acetaminophen. How do the diagrams differ? Which company has the bigger mark-up? Explain. c) How might barriers to entry influence the behaviour of the makers of Tylenol? d) What factors would affect the extent to which the makers of Tylenol could engage in predatory or destroyer pricing to force out competitors in this market?
7. Short-run supply and long-run equilibrium Consider the competitive market for rhenium. 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 60 40 20 10 + 0 + 0 MC + 5 ATC AVC D 0 10 15 20 25 30 35 QUANTITY (Thousands of pounds) 40 + 45 50 ?
Suppose that Roots' marginal cost of a jacket is a constant $75.00 and the total fixed cost at one of its stores is $2,000 a day. This store sells 25 jackets a day, which is its profit-maximizing number of jackets. Then the stores nearby start to advertise their jackets. The Roots store now spends $1,000 a day advertising its jackets, and its profit-maximizing number of jackets sold jumps to 75 a day. What is this store's average total cost of a jacket sold before the advertising begins and after the advertising begins. >>> Answer to 2 decimal places. Can you say what happens to the price of a Roots jacket, Roots' markup, and Roots' economic profit? Before the advertising begins, the average total cost of a jacket sold in this store is $ After the advertising begins, the average total cost of a jacket sold in this store is $ If the nearby firms' advertising decreases the demand for Roots' jackets and makes the demand more elastic, the price of a Roots' jacket If Roots' advertising…
The following graph illustrates the demand and marginal revenue curve (D-MR) of a perfectly competitive firm. Suppose that when the firm produces 40 units, its average variable cost equals $65 per unit and its average total cost equals $80 per unit. Use the green rectangle (triangle symbols) to plot the total cost of producing 40 units. Next, use the grey rectangle (star symbols) to plot the total variable cost of producing 40 units. Then, use the tan rectangle (dash symbols) to plot the total revenue at 40 units. Finally, use the purple rectangle (diamond symbols) to plot the profit or loss at 40 units. PRICE AND COST (Dollars) 100 90 80 70 60 50 40 30 20 10 0 0 10 + 20 +ATC + AVC 30 40 50 60 QUANTITY (Units) 70 80 D=MR 90 H 100 Total Cost Total Variable Cost I Total Revenue Profit or Loss ?
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Farmer Jones grows sugar. The total revenue, marginal revenue, total cost, and marginal cost of producing various quantities of sugar (bushels in 1000s) are presented in the table below Marginal Output (bushels in 1000s) Total Revenue Marginal Total Revenue Cost Cost 0 $0 0 1 86 86 120 120 2 172 86 200 80 258 86 240 40 344 86 320 80 5 430 86 480 160 516 86 680 200 Suppose the market for sugar is perfectly competitive. To maximize profits, farmer Jones should produce At that level of output, farmer Jones will earn profit of S thousand bushels of sugar. (Enter a numeric response using an integer)
Suppose the book-printing industry is competitive and begins in a long-run equilibrium. Then Hi-Tech Printing Company invents a new process that sharply reduces the cost of printing books. The following graph shows Hi-Tech's initial marginal-cost curve (MC1) and average-total-cost curve (ATC1 ) before the new technology, and its marginal-cost curve (MC2) and average-total-cost curve (ATC2) after the new technology. Price of Books ATC1 * MC₁ MC 2 Quantity of Books ATC2 ?
Consider the weekly market for.gyros in a popular neighborhood close to campus. Suppose this market is operating in long-run competitive equilibrium with many gyro vendors in the neighborhood, each offering basically the same gyros. Due to the structure of the market, the vendors act as price takers and each individual vendor has no market power. The following graph displays the supply (SMC) and demand (D) curves in the weekly market for gyros. Place the black point (plus symbol) on the graph to indicate the market price and quantity that will result from competition. PRICE (Dollars per gyro) 5.0 4.5 4.0 Competitive Market 3.5 S=MC 3.0 2.5 2.0 1.5 1.0 0.5 D 0 0 50 100 150 200 250 300 350 400 450 500 PC Outcome (?)
True or false: In a perfectly competetive market, when AVP<P<ATC, a firm will not produce any output to minimize its costs. Explain why using a graph.
7. Short-run supply and long-run equilibrium Consider the competitive market for copper. Assume that, regardless of how many firms are in the industry, every firm in the industry is identical and faces the marginal cost (MC), average total cost (ATC), and average variable cost (AVC) curves shown on the following graph. COSTS (Dollars per pound) 80 72 64 56 48 40 32 24 16 8 0 0 MC ATC AVC 4 8 12 16 20 24 QUANTITY (Thousands of pounds) 0 n 28 32 U 36 40 (?)
Assume the following regarding a firm in Perfect Competition: Market Demand = Qd 460-3P Market Supply = Qs = 9 P Each identical firm has: MC=4q ATC = 14 1. What price will the firm charge? Number 2. What is the firm's equilibrium quantity? Number 3. What is the firm's total cost? Number 4. What is the firm's total revenue? Number 5. What is the firm's profit or loss? (use a negative sign to indicate a loss) Number 6. Is the firm in a short-run or long-run situation? Click for List

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