3. For a perfectly competitive firm: a. the demand curve is perfectly inelastic at the market price and is one and the same with its marginal-revenue curve. b. economic profits can be earned in the long run but not in the short run. c. the profit-maximizing quantity to produce occurs at that output level in which price equals marginal cost. d. its total-revenue function is linear (a straight line), with a slope equal to the quantity
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- .A fisher sells salmon in a perfectly competitive market and faces a price of $5 per kg at possible weekly outputs of between O and 5000 kg. a. What is the fişher's marginal revenue in this output range? b. Because the fisher operates in a perfectly competitive market, how are marginal revenue and price related? C. Draw the fisher's marginal revenue curve on a graph. Plot only the endpoints at O and 5000 kg to draw the curve.1.i) Assuming you are the managing director of a firm that produces goods: A,B and C .The price elasticity of demand for A is 1.2, for B it is 1.oo and C is 0.75. It is known that he's firm is experiencing serious cash flow problems and you have to increase total revenue as soon as possible. If you were in a position to set the prices for these goods, what would be your pricing strategy for each product ii) price falls from N$ 16 to N$ 12 per bottle and demand rises from 200 to 300 per bottle.calculate the PED using midpoint formula Output prices average (total)cost Total cost marginal cost Total profit/loss 10 10 -108 20 10 4 -48 30 10 5 3 40 10 6.20 40 50 10 8 60 60 10 10 60 2. i) fill in the gaps ii)in which market structure doess Johnson Electronics (Pty)Ltd operate? iii)what level of output maximizes the firms profitWhich of the following offers the best explanation of why “marginal revenue equals marginal cost” is the rule that indicates the profit-maximizing output level? a. If output were reduced from the profit-maximizing level, then the firm would be gaining marginal revenue that exceeds marginal cost, and thus increasing the level of profit. b. The marginal revenue is equal to the marginal cost at all levels of output for a perfectly competitive firm. c. If output were increased from the profit-maximizing level, then the firm would be gaining marginal revenue that is less than the marginal cost incurred in producing this additional unit, and thus reducing the level of profit. d. Because the firm colludes with other similar firms to set price equal to marginal cost.
- 16. The accompanying graph shows the short-run demand and cost situation for a price searcher in a market with low barri- ers to entry. a. What level of output will maximize the firm's profit level? b. What price will the firm charge? c. How much revenue will the firm receive in this situation? How much is total cost? Total profit? d. How will the situation change over time?2. Suppose a firm faces demand of Q = 300 – 2P and has a total cost curve of TC = 75Q + Q². a. What is the firm's marginal revenue? b. What is the firm's marginal cost? c. Find the firm's profit-maximizing quantity where MR= MC. d. Find the firm's profit-maximizing price and profit.Sol-Motors is the only auto manufacturer in West Lidia, a country that prohibits the importation of cars. The graph below shows the demand and the costs for Sol-Motors. Costs and revenues (in thousands) 130 120 110 100 90 80 70 60 40 20 10 15 30 45 75 MC D 60 90 105 201355 $150¹65180195 Quantity per period (in thousands) Tools
- 6. A firm's demand function for a certain good is given by P= 100e"1e. Its total cost function is rC=100e 10 + 50. What output level maximizes the firm's profit?Suppose a firm is operating in a competitive market and is maximizing profit by producing at thepoint where marginal revenue 5 marginal cost.Now suppose that consumer wealth decreasesin this market (and the good is a normal good).What might you expect to happen to the profitmaximizing output quantity for the firm?3. Johnny Rockabilly has just finished recording his latest CD. His record company's marketing department determines that the demand for the CD is as follows: Price Number of CDs $24 10 000 22 20 000 20 20 30 000 18 40 000 16 50 000 14 60 000 The company can produce the CD with no fixed cost and a variable cost of $5 per CD. a. Find total revenue for quantity equal to 10 000, 20 000, and so on. What is the marginal revenue for each 10 000 increase in the quantity sold? b. What quantity of CDs would maximize profit? What would be the price? What would be the profit? c. If you were Johnny's agent, what recording fee would you advise Johnny to demand from the record company? Why?
- 1. Suppose a perfectly competitive firm has a cost function described by TC = 200Q+Q² +225 Each firm's marginal revenue is $240. a. Find the profit maximizing level of output. b. Is this a short-run or long-run situation? How do you know? c. Assuming that this firm's total cost curve is the same as all other producers, find the long-run price for this good.3. Consider the perfectly competitive markets for bottled water in two cities, A and B. Both have a downward-sloping demand curve and upward-sloping supply curve, and each market is currently in long run equilibrium at the same price. The demand curves are similar, but in city A the supply curve is more price elastic than in city B. a) There's a shock: an accident causes the tap water in the area to become undrinkable. In two diagrams, one for each city, compare the effect on price and quantity traded in the two cities, assuming that a new equilibrium is reached. Explain your diagrams. b) Following on from your answer to a), explain what would happen in the model to the number of suppliers and their profitability, in each of the short run and the long run.1. Assume a perfectly competitive market. Draw the average total cost, average variable cost, marginal cost, and marginal revenue curves for a good. Determine the profit-maximizing level of output given that the price of the good is above the minimum average variable cost but below the minimum average total cost Is the profit at the chosen price point positive, zero, or negative ? Shade the area representing profit