- Answer the following questions based on the table below. This is the cost data for a purely competitive firm.
TOTAL PRODUCT |
AVERAGE FIXED COST |
AVERAGE VARIABLE COST |
AVERAGE TOTAL COST |
MARGINAL COST |
|---|---|---|---|---|
0 |
||||
1 |
$60.00 |
$45.00 |
$105.00 |
$45 |
2 |
30.00 |
42.50 |
72.50 |
40 |
3 |
20.00 |
40.00 |
60.00 |
35 |
4 |
15.00 |
37.50 |
52.50 |
30 |
5 |
12.00 |
37.00 |
49.00 |
35 |
6 |
10.00 |
37.50 |
47.50 |
40 |
7 |
8.57 |
38.57 |
47.14 |
45 |
8 |
7.50 |
40.63 |
48.13 |
55 |
9 |
6.67 |
43.33 |
50.00 |
65 |
10 |
6.00 |
46.50 |
52.50 |
75 |
A) Assume a price of $66.
How many units will this firm produce? _______________
What is the amount of economic profit or loss? $________
Choose one: PROFIT LOSS
B) Assume a price of $46 .
How many units will this firm produce? _______________
What is the amount of economic profit or loss? $________
Choose one: PROFIT LOSS
C) Assume a price of $36.
How many units will this firm produce? _______________
What is the amount of economic profit or loss? $________
Choose one: PROFIT LOSS
D) Why would a firm produce in the short run even if they are experiencing a loss?
E) At what point will the firm choose to shut down?
F) In the table below, complete the short run supply schedule for the firm (columns 1 and 2) and indicate the profit or loss incurred at each output (column 3). Finally complete column 4 with the quantity that would be supplied if the market consisted of 1500 identical firms.
PRICE |
QUANITY SUPPLIED, single firm |
PROFIT (+) OR LOSS (-) |
QUANTITY SUPPLIED, 1500 firms |
|---|---|---|---|
$26 |
|||
32 |
|||
38 |
|||
41 |
|||
46 |
|||
56 |
|||
66 |
G) Assume the table below provides the market demand data for the product above.
PRICE |
TOTAL QUANTITY DEMANDED |
|---|---|
$ 26 |
17,000 |
32 |
15,000 |
38 |
13,500 |
41 |
12,000 |
46 |
10,500 |
56 |
9,500 |
66 |
8,000 |
What is the equilibrium price? $______________
What is the equilibrium quantity for theindustry? ______________
What is the equilibrium quantity for each firm? ________________
What is the profit/loss for each firm? ______________
Will the industry expand or contract in the long run? _______________
Why?
- Answer the following questions based on the table below. This is for a non-discriminating monopolist.
PRICE |
QUANTITY DEMANDED |
TOTAL REVENUE |
MARGINAL REVENUE |
|---|---|---|---|
$ 115 |
0 |
||
100 |
1 |
||
83 |
2 |
||
71 |
3 |
||
63 |
4 |
||
55 |
5 |
||
48 |
6 |
||
42 |
7 |
||
37 |
8 |
||
33 |
9 |
||
29 |
10 |
A) Complete the table above for a non-discriminating monopolist.
B) Assume the same cost data as for the purely competitive firm in question 1. (HINT: Feel free to combine the table in question 1 with above, it may make it easier to see the relationships.)
What is the profit maximizing price and output for a non-discriminating monopolist?
Price ____________ Output ____________
How much profit will this monopolist earn?
- Do question number 6 at the end of the chapter of the textbook.
22‑6 (Key Question) Suppose that a price discriminating monopolist has segregated its market into two groups of buyers, the first group described by the demand and revenue data that you developed for question 2 above. The demand and revenue data for the second group of buyers is shown in the accompanying table.
Assume that MC is $13 in both markets and MC = ATC at all output levels.
Price |
Quantity demanded |
TOTAL REVENUE |
MARGINAL REVENUE |
|---|---|---|---|
$71 |
0 |
||
63 |
1 |
||
55 |
2 |
||
48 |
3 |
||
42 |
4 |
||
37 |
5 |
||
33 |
6 |
||
29 |
7 |
A) Complete the table above for a price discriminating monopolist.
B) Assume the same cost data as for the pure monopolist firm in question 2. (HINT: Feel free to combine the table in question 2 with above, it may make it easier to see the relationships.)
What price will the firm charge in each market?
Based solely on these two prices, what can you conclude about the relative elasticities of demand in the two markets?
What will be this monopolist’s total economic profit?
- Explain how price is determined for a regulated monopolist.
_______________ = ________________