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- 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. 80 72 56 · ཉི་ ཀ་ཇཱ་སྐ་ན་ COSTS (Dollars per pound) AVC 16 MC- 8 ATC B 12 16 20 24 28 QUANTITY (Thousands of pounds) 36 The following graph plots the market demand curve for ruthenium. ? Use the orange points (square symbol) to plot the initial short-run industry supply curve when there are 10 firms in the market. (Hint: You can disregard the portion of the supply curve that corresponds to prices where there is no output since this is the industry supply curve.) Next, use the purple points (diamond symbol) to plot the short-run industry supply curve when there are 20 firms. Finally, use the green points (triangle symbol) to plot the short-run industry supply curve when there are 30 firms. PRICE (Dollars per pound) 80 72…Assume that the cost data in the following table are for a purely competitive producer: Average Average Average Total Variable Marginal Cost Total Fixed Product Cost Cost Cost 1 $60.00 $45.00 $105.00 $ 45.00 30.00 42.50 72.50 40.00 3 20.00 40.00 60.00 35.00 4 15.00 37.50 52.50 30.00 12.00 37.00 49.00 35.00 6. 10.00 37.50 47.50 40.00 7 8.57 38.57 47.14 45.00 7.50 40.63 48.13 55.00 9. 6.67 43.33 50.00 65.00 10 6.00 46.50 52.50 75.00 Instructions: If you are entering any negative numbers be sure to include a negative sign (-) in front of those numbers. Select "Not applicable" and enter a value of "0" for output if the firm does not produce. a. At a product price of $57.00 (i) Will this firm produce in the short run? (Click to select) V (ii) If it is preferable to produce, what will be the profit-maximizing or loss-minimizing output? |(Click to select V output = units per firm (iii) What economic profit or loss will the firm realize per unit of output? |(Click to select v per unit = $ b.…1. A firm’s production function is , where Ldenotes the size of the workforce. Find the value of MPLin the case when: (a) L=1, (b) L=10, (c) L=100, (d) L=1000 Does the law of diminishing marginal productivity apply to this particular function? 2. Show that the price elasticity of demand is constant for demand functions of the form where A and n are positive constants. 3. The demand and total cost functions of a good arerespectively and a) Find expressions for TR, (profit) , MR, and MC in terms of Q. b) Solve the equation and hence determine the value of Q which maximizes profit. c) Verify that, at the point of maximum profit, MR=MC. 4. The cost of building an office complex, x floors high, in a prime location in Accra is made up of three components: (a) GH¢10 million for the land (b) GH¢1/4 million per floor (c) Specialized costs of GH¢10000x per floor. How many floors should the office complex contain if the average cost per floor is to be minimized? 5. The supply…
- 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?2. Consider a competitive market where there are two types of firms, Type A and Type B, with total cost functions TC(q) = 2+4q+q² TCB (q) = 8+4q+6q² (a) Derive the short-run supply curve for each firm type (b) What is the short-run market supply, if there are 6 Type A firms, and 12 Type B firms? What is total quantity produced when p=10? (d) How does your answer at (c) change if we consider long run supply rather than short run? Here, assume again that p=10 and that there are 6 Type A firms and 12 Type B firms.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?
- 4. A vertically integrated automobile company has an upstream engine division and a downstream assembly division. The demand for the company's cars is given by Q = 20-P. Each car requires one engine. The downstream division's total cost of assembling cars is TCD(Q) = 4Q. The upstream division's total cost of producing engines is TCv (Q) = Q². (a) Suppose that there is no outside market for engines. What is the price and quantity of cars produced by the company? (b) Suppose that there is no outside market for engines. What should be the transfer price for engines? [Hint: the transfer price of an engine should equal the marginal cost of engine production at the optimal quantity.] (c) Suppose that there is a competitive outside market in which the price of an engine is 12. What is the price and quantity of cars produced by the company? (d) Suppose that there is a competitive outside market in which the price of an engine is 12. What is the quantity of engines that the company buys or…Refer to Figure 1 for questions 18-20. In Figure 1: D = Demand Curve; MR = Marginal Revenue Curve; and MC = LRATC is Marginal Cost, assumed to be equal to Long Run Average Total Cost. What is the competitive output and price for this market? Options: a) P = $3, Q = 7 b) P = $6, Q = 4 c) P = $3, Q = 4 d) P = $6, Q = 7Question 6 options: The price of a product in a competitive market is $100. The cost per unit of producing the product is c=50+.1x, where x is the number of units produced each month. Find a) The monthly revenue R(x) b) The monthly cost function C(x) c) The monthly profit function P(x) d) Find x such that profit is maximized, and find the maximum profit
- 7. Short-run supply and long-run equilibrium Consider the perfectly 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 kilogram) 80 72 64 56 48 40 32 16 8 0 0 4 MC 8 ATC AVC □ 12 16 20 24 28 32 QUANTITY (Thousands of kilograms) 36 The following diagram shows the market demand for copper. □ 40 ? Use the orange points (square symbol) to plot the initial short-run industry supply curve when there are 10 firms in the market. (Hint: You can disregard the portion of the supply curve that corresponds to prices where there is no output since this is the industry supply curve.) Next, use the purple points (diamond symbol) to plot the short-run industry supply curve when there are 20 firms. Finally, use the green points (triangle symbol) to plot the short-run industry…Question 23 A competitive firm has a total cost function in dollars of the form C(q)= 100–4q + q^2, where q is output. Suppose the market price is $10 per unit of output. What is the firm’s short run point elasticity of supply? a) 20/7 b) 5/7 c) 10/7 d) 0.5 e) 210. Given a qmes = 100 and a minimum long-run average total cost of $2. (a) If the quantity demanded at p = $2 is 10, 000. How many firms can enter the market and at least break-even? (b) If technology gets better and reduces the minimum long-run average total cost of $1 and increases qmes = 9,000. At p = $1 the quantity demanded is 14, 000. How many firms || can enter the market and at least break-even? What market structure will describe this market better, perfect competition or monopoly?