ECO 305 Lecture Notes - Lecture 8: Peanut Butter, Demand Curve, Marginal Cost

59 views1 pages

blackbuffalo990

26 May 2018

School

Department

Course

Professor

For unlimited access to Class Notes, a Class+ subscription is required.

1) Each of 1000 identical firms in a competitive peanut butter industry had s short-run

marginal cost curve given by SMC = 4 + Q. If the demand curve for this industry is

   

 what will be the short-run loss in producer and consumer surplus if an

outbreak of aflatoxin suddenly makes it impossible to produce any peanut butter?

Support your answer with a proper graph of the market supply and demand. (60 points)

MC = 4 + Q, Q = MC – 4 = – 4000, or Q = 1000MC – 4000. MC = P, so Q = 1000 P – 4000, P =

4 + 0.001Q. MC = P, 4 + 0.001Q = 10 – 0.002Q = 0.003Q = 6, Q = 2000 units, and P =

$6/unit. Consumer surplus = area of upper triangle = (10 – 6)(2000)/2 = $4000. Producer surplus

= area of lower triangle = (6 – 4)(2000)/2 = $2000. Total loss of surplus = $6000.

2) A Monopolist has a demand curve given by P=100 – Q and a total cost curve given by

TC=16 + 4Q2. The associated marginal cost curve given by MC= 8Q. (40 points)

a) Find the monopolist’s profit-maximizing quantity and price.

MC = 8Q, MR = 100 - 2Q P = 100 - Q

100 - 2Q = 8Q P = 100 - 10

Q= 10 P = 90

b) How much economics profit will the monopolist earn?

TC = 16 + 4(10)2 TR = 100 (10) – (10)2

TC = 416 TR = 900

EP = TR – TC = 900 – 416 = 484

find more resources at oneclass.com

Unlock document

This preview shows half of the first page of the document.
Unlock all 1 pages and 3 million more documents.

Already have an account? Log in

Document Summary

Each of 1000 identical firms in a competitive peanut butter industry had s short-run marginal cost curve given by smc = 4 + q. If the demand curve for this industry is. Support your answer with a proper graph of the market supply and demand. (60 points) Mc = 4 + q, q = mc 4 = 4000, or q = 1000mc 4000. Mc = p, so q = 1000 p 4000, p = Mc = p, 4 + 0. 001q = 10 0. 002q = 0. 003q = 6, q = 2000 units, and p = Consumer surplus = area of upper triangle = (10 6)(2000)/2 = . = area of lower triangle = (6 4)(2000)/2 = . Total loss of surplus = : a monopolist has a demand curve given by p=100 q and a total cost curve given by. The associated marginal cost curve given by mc= 8q. (40 points: find the monopolist"s profit-maximizing quantity and price.

Related Questions

Suppose there are 100 firms in a perfectly competitive industry. Each firm has a U-shaped, long-run average cost curve that reaches a minimum of $10 at an output level of 8 units. Marginal costs are given by

MC(q)= q+2

and market demand is given by

Q=1000-20P

a. Find the long-run equilibrium in this market and determine the consumer and producer surplus (in this case, the areas of the triangles).

b. Suppose instead there was a single supplier whose marginal cost curve is

MC(Q) =(1/100)Q+2

i) From the above expression for market demand, determine the monopolist's average revenue curve.

ii) From part (i), find the monopolist's total revenue curve.

iii) Differentiate the expression in part (ii) to obtain the monopolist/s marginal revenue curve.

greenrat247

6. Power Printers Total Costs (per hour)

q TC

0 65

1 80

2 95

3 120

4 150

5 200

If the price of a printer is $50 in this perfectly competitive industry, what is the profit-maximizing rate of output?

7. Which of the following is NOT true in a perfectly competitive market?

a. There is free entry and exit into the industry.

b. Each firm produces a differentiated product.

c. Each firm faces a perfectly elastic demand curve.

d. Price is equal to marginal revenue at every output level for the firm.

8. A perfectly competitive firm should always continue to operate in the short run as long as:

a. P < ATC at the rate of output where MR = MC.

b. P < AVC at the rate of output where MR = MC.

c. MR > AVC at the rate of output where MR = MC.

d. MR > AFC at the rate of output where MR = MC.

9. A firm that makes zero economic profits:

a. Must eventually go bankrupt.

b. Should shut down.

c. Incurs a loss, but should not shut down.

d. Covers all its costs, including a provision for normal profit.

10. A monopoly firm is different from a competitive firm in that:

A. There are many substitutes for the monopolistâs product whereas the competitive firmâs demand curve is perfectly elastic.

B. The monopolistâs demand curve is perfectly inelastic, whereas the competitive firmâs demand curve is perfectly elastic.

C. The monopolist can influence the price in the market, whereas the competitive firm is a price taker.

D. All of the above

taupewombat30

Suppose that each firm in a competitive industry has the following costs:

Total Cost: TC=50+1/2 q2

Marginal Cost: MC=q

where q is an individual firm's quantity produced.

The market demand curve for this product is:

Demand QD=140-2P

where P is the price and Q is the total quantity of the good.

Each firm's fixed cost is $__________

What is each firm's variable cost?

_______ 50+1/2q

_______1/2q

_______q

_______1/2q2

Which of the following represents the equation for each firm's average total cost?

_____ 50/q

_______ 50/q+1/2q

_______1/2q

_______50+1/2q

Complete the following table by computing the marginal cost and average total cost for from 5 to 15.

5
6
7
8
9
10
11
12
13
14
15

The average total cost is at its minimum when the quantity each firm produces (q) iquals ________

Which of the following represents the equation for each firm's supply curve in the short run?

_______1/2q2

______q

_____50-q

_____120-1/2q2

In the long run, the firm will remain in the market and produce if________

Currently, there are 8 firms in the market.

In the short run, in which the number of firms is fixed, the equilibrium price is__________ In the short run, in which the number of firms is fixed, the equilibrium price is

________units. Each firm produces ________ nits. (Hint: Total supply in the market equals the number of firms times the quantity supplied by each firm.)

In this equilibrium, each firm makes a profit of _______ . (Note: Enter a negative number if the firm is incurring a loss.)

Firms have an incentive to EXIT/ENTER the market.

In the long run, with free entry and exit, the equilibrium price is _______and the total quantity produced in the market is__________units. There are ________

firms in the market, with each firm producing _________units.

orchidbadger835

ECO 305 Lecture Notes - Lecture 8: Peanut Butter, Demand Curve, Marginal Cost

Document Summary

Get access

Related textbook solutions

Principles of Economics

Principles of Macroeconomics

Principles of Microeconomics

Related Documents

ECO 305 Lecture Notes - Lecture 7: Average Variable Cost, Marginal Cost, Fixed Cost

ECON 1P91 Lecture Notes - Lecture 8: Monopoly Price, Allocative Efficiency, Demand Curve

Economics 2150A/B Lecture Notes - John Wiley & Sons, Economic Equilibrium, Average Variable Cost

Related Questions