Managerial Economics: A Problem Solving Approach
5th Edition
ISBN: 9781337106665
Author: Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher: Cengage Learning
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Chapter 10, Problem 8MC
To determine
Resource heterogeneity.
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Economics
1. Rob Doe just started a ice cream business within a perfectly competitive market. The new business man was told that he would charge a price that is equal to marginal revenue. The market clearing price for ice cream is $20 dollars per scoop. The total cost for producing ice cream is given by:
Total cost = q2 + 100q + 500 where q is the number of ice cream produced in a typical day.
a. How many ice cream should Rob choose to produce to maximize profit?
b. Calculate Rob's maximum daily profit
c. Graph these results, and label Rob's supply curve
Q. Suppose the book-printing industry is competitive and begins in long-run equilibrium.
a. Draw a diagram describing the typical firm in the industry.
b. Hi-Tech Printing Company invents a new process that sharply reduces the cost of printing
books. What happens to Hi-Tech’s profits and the price of books in the short run when
Hi-Tech’s patent prevents other firms from using new technology?
c. What happens in the long run when the patent expires and other firms are free to use the technology?
If the minimum efficient scale of a firm is small relative to the demand for the good, then__.
Select one:
a. firms have a minimum efficiency and could do better by producing more.
b. many small firms can enter the market.
c. there will be no economic profits for any small firms, so no new firms will enter.
d. several large firms will enter the market thereby reducing competition.
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Managerial Economics: A Problem Solving Approach
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