Instant Download
What is the difference between accounting profit and economic profit? How could a firm earn a positive accounting profit but a negative economic profit? Several years ago, the Monmouth restaurant Courtyard Kitchen was sold to new owners. The previous owners told your instructor that they were earning positive accounting profits operating their restaurant yet they decided to sell the business. Given your answer to the first part of this question, how would an economist explain their decision to sell?
A perfectly competitive firm has the following total cost and marginal cost functions: TC = 100 + 10q – q2 + (1/3)q3 and MC = q2 – 2q +10
(a) For quantities from 0 to 10 determine: TC, TFC, TVC, and MC.
(b) For quantities from 0 to 10 determine: ATC, AFC, and AVC.
c) Assume P (MR) equals 45. For quantities from 0 to 10 determine: TR and profit.
d) At what quantity is profit maximized? At this quantity what is true about the relationship between MC and MR?
Using a graph(s), illustrate the four possible short-run outcomes for a perfectly competitive firm. You should draw separate graph for the market and for the representative firm
Suppose there is a competitive, constant-cost, industry in which each firm’s marginal and average costs are as follows:
MC = 10q
AC = 5q + (720/q)
Where q = quantity produced by each firm
Suppose your firm, Jane & Joe’s Coffee Company, is in a competitive industry in which you are currently in long run equilibrium and making 0 economic profits.
Suppose the market for yo-yos is such that at the equilibrium price there is no CS or PS. Show the demand and supply curves, P*. Why are you unable to determine Q*?
Imagine you are lost in the desert and running low on water. Suddenly you find a person selling water at an oasis. But there is no information about the price of water. When you ask the seller about the price she says “let’s negotiate.” What kind of price discrimination is this?
Suppose you decide to open a gym/health club in Salem. You decide to charge your customers $100/year in membership fees plus a yearly fee. Suppose you know that there are two types of people who will join your club, the Type I people and the Type II people. Type I people had demand: P=200-Q and Type II people have demand: P=400-Q. At a price of $100 how many memberships will you sell to each group (assume Q is determine by the point at which price intersects the demand curves). What is the highest yearly fee you can charge without losing the Type I people?
A monopolist has the inverse demand function P=200-2Q. MC is constant and = 50. FC=0.
Use the prisoner’s dilemma model to illustrate the incentive to cheat in a cartel.
The demand for slurpees in a competitive market is P=100-2Q and supply is P=Q. What is the equilibrium price and quantity? What is the value of the area of consumer surplus? What is the value of the area of producer surplus? What are the gains to trade in the market? Suppose the slurpee market is monopolized by one firm. Assume the supply function now represents the monopolists marginal costs schedule. The demand schedule is unchanged. What is the monopolist’s marginal revenue mathematically? With a monopoly, what is the equilibrium price and quantity? What is the value of the area of consumer surplus? What is the value of the area of producer surplus? What are the gains to trade in the market? What is the value of the area of deadweight loss.
David Beckham replica Los Angeles Galaxy soccer jerseys are produced in a competitive market where demand is P=500-(Q/2) and supply is P=2Q. A tax of 100 is applied to each jersey sold. The tax is collected from the sellers.
What is the equilibrium quantity of jerseys sold?
What is the equilibrium price to the buyer?
What does the seller receive per jersey?
Calculate the area of deadweight loss.
There are two firms in the insurance industry, Firm A and Firm B. Assume each firms acts independently to determine its profit maximizing output of insurance polices and the price of those policies. The demand for Firm A’s policies is P=100-Q and its marginal cost is MC=Q. The demand for Firm B’s policies is P=60-Q and its marginal cost is MC=2Q.
Suppose the two firms form a cartel and their joint demand function is P=80-(Q/2) and marginal cost is MC=2/3Q.
D. Determine their joint marginal revenue.
E. Determine their profit maximizing output and price.
What are PSLs? Why are they an important source of revenue? What kind of price discrimination do they represent? In determining the price of the PSL, what must the team consider (what limits the maximum price the team can charge for a PSL)?
A firm that sells slurpees believes that its customers are either Type A customers or Type B customers. The firm estimates the demand for Type A’s as: P=200-2Q and for Type B’s: P=100-1/2(Q). Using the point-slope formula for price elasticity of demand, determine which Type has more elastic demand and which has less elastic demand. Then, assuming MC=20, determine the profit maximizing price and quantity for each Type.
What is the difference between accounting profit and economic profit? How could a firm earn a positive accounting profit but a negative economic profit? Several years ago, the Monmouth restaurant Courtyard Kitchen was sold to new owners. The previous owners told your instructor that they were earning positive accounting profits operating their restaurant yet they decided to sell the business. Given your answer to the first part of this question, how would an economist explain their decision to sell?
A perfectly competitive firm has the following total cost and marginal cost functions: TC = 100 + 10q – q2 + (1/3)q3 and MC = q2 – 2q +10
(a) For quantities from 0 to 10 determine: TC, TFC, TVC, and MC.
(b) For quantities from 0 to 10 determine: ATC, AFC, and AVC.
c) Assume P (MR) equals 45. For quantities from 0 to 10 determine: TR and profit.
d) At what quantity is profit maximized? At this quantity what is true about the relationship between MC and MR?
Using a graph(s), illustrate the four possible short-run outcomes for a perfectly competitive firm. You should draw separate graph for the market and for the representative firm
Suppose there is a competitive, constant-cost, industry in which each firm’s marginal and average costs are as follows:
MC = 10q
AC = 5q + (720/q)
Where q = quantity produced by each firm
- Determine the quantity supplied by each firm in the long run, and determine the long run price in this industry.
- Assume the market demand for the good produced in this industry is: P = 360 – (1/3q)
Using your answers from part i., determine the equilibrium market quantity and the number of firms in the long run.
Suppose your firm, Jane & Joe’s Coffee Company, is in a competitive industry in which you are currently in long run equilibrium and making 0 economic profits.
- Illustrate this situation with a graph. Show how the graph for the market is related to the graph for the firm.
- Suppose the demand for coffee falls (the demand schedule shifts to the left). Illustrate this situation and discuss what happens in the market and to the firm.
- Describe and illustrate what will happen to your firm, and the industry, as it moves back toward long run equilibrium.
Suppose the market for yo-yos is such that at the equilibrium price there is no CS or PS. Show the demand and supply curves, P*. Why are you unable to determine Q*?
- What three things must be true for a firm to price discriminate?
- What kind of price discrimination is applicable to: College tuition
Movie tickets
Coupons
Golf club memberships
Buying a house
Senior citizen discounts
Imagine you are lost in the desert and running low on water. Suddenly you find a person selling water at an oasis. But there is no information about the price of water. When you ask the seller about the price she says “let’s negotiate.” What kind of price discrimination is this?
Suppose you decide to open a gym/health club in Salem. You decide to charge your customers $100/year in membership fees plus a yearly fee. Suppose you know that there are two types of people who will join your club, the Type I people and the Type II people. Type I people had demand: P=200-Q and Type II people have demand: P=400-Q. At a price of $100 how many memberships will you sell to each group (assume Q is determine by the point at which price intersects the demand curves). What is the highest yearly fee you can charge without losing the Type I people?
A monopolist has the inverse demand function P=200-2Q. MC is constant and = 50. FC=0.
- What is the firm’s P* and Q*
- What is the firm’s profit
- Calculate CS, PS, and DWL
Use the prisoner’s dilemma model to illustrate the incentive to cheat in a cartel.
The demand for slurpees in a competitive market is P=100-2Q and supply is P=Q. What is the equilibrium price and quantity? What is the value of the area of consumer surplus? What is the value of the area of producer surplus? What are the gains to trade in the market? Suppose the slurpee market is monopolized by one firm. Assume the supply function now represents the monopolists marginal costs schedule. The demand schedule is unchanged. What is the monopolist’s marginal revenue mathematically? With a monopoly, what is the equilibrium price and quantity? What is the value of the area of consumer surplus? What is the value of the area of producer surplus? What are the gains to trade in the market? What is the value of the area of deadweight loss.
David Beckham replica Los Angeles Galaxy soccer jerseys are produced in a competitive market where demand is P=500-(Q/2) and supply is P=2Q. A tax of 100 is applied to each jersey sold. The tax is collected from the sellers.
What is the equilibrium quantity of jerseys sold?
What is the equilibrium price to the buyer?
What does the seller receive per jersey?
Calculate the area of deadweight loss.
There are two firms in the insurance industry, Firm A and Firm B. Assume each firms acts independently to determine its profit maximizing output of insurance polices and the price of those policies. The demand for Firm A’s policies is P=100-Q and its marginal cost is MC=Q. The demand for Firm B’s policies is P=60-Q and its marginal cost is MC=2Q.
- Determine each firm’s marginal revenue.
- Determine Firm A’s profit maximizing output and price.
- Determine Firm B’s profit maximizing output and price.
Suppose the two firms form a cartel and their joint demand function is P=80-(Q/2) and marginal cost is MC=2/3Q.
D. Determine their joint marginal revenue.
E. Determine their profit maximizing output and price.
What are PSLs? Why are they an important source of revenue? What kind of price discrimination do they represent? In determining the price of the PSL, what must the team consider (what limits the maximum price the team can charge for a PSL)?
A firm that sells slurpees believes that its customers are either Type A customers or Type B customers. The firm estimates the demand for Type A’s as: P=200-2Q and for Type B’s: P=100-1/2(Q). Using the point-slope formula for price elasticity of demand, determine which Type has more elastic demand and which has less elastic demand. Then, assuming MC=20, determine the profit maximizing price and quantity for each Type.
