SB a medium-sized foundry specializing in the manufacturing of heavy duty pipe for industrial uses, sells its product into a monopolistic competitive industry. SB Demand and total cost functions are as follows:

P = $4,500 - $1Q (Demand Curve)

TC = $150,000 + $400Q (Total Cost Function)

where P is the price, Q is output (thousands of feet of heavy gauge pipe) and TC is the total cost per period of time.

A. Determine the short-run profit-maximizing price/output combination and profit level for Sifuentes Foundry.

B. Compute price, output and profits under the assumption that Sifuentes seeks to maximize total revenue.

C. What output, price and economic profit will occur in longer-run equilibrium? (Assume longer-run equilibrium occurs through a parallel leftward shift in the Demand curve.)

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Hubert KochLv2

27 May 2019

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Trailer company has asked its financial planning committee to analyze short- and longer-run pricing and production levels for the new hawk II trailer. To facilitate the decision making process, the committee has been provided the following Demand and total cost functions by marketing and production departments:

P = 7000 - 5Q

TC = 225,000 + 1000Q + 10Q2

where, P = Price (in dollars)

Q = Quantity (units)

TC = Total Cost (in dollars)

A. What short-run price and output combination would be recommended if the committee decided that Skyhawk should take full advantage of its short-run monopoly position and maximize profits? What will profits be?

B. What longer-run price and output combination would result if Tomahawk IIâs current brand loyalty and cost/output relationship can be maintained despite competitor offerings of several varieties of similar (not identical) trailers, but the firm cannot earn any economic profits? (Note: For simplicity, assume Tomahawk II sales decline because of a parallel leftward shift in the Demand curve while the cost/output relationship, which includes a normal profit, remains unchanged.)

C. What 1) longer-run price and 2) output combination would result if Skyhawkâs patent protection were to expire (and/or be circumvented) and competitors offered trailers identical to the Tomahawk II such that a perfectly competitive market existed? Again, assume that the current cost-output relationship can be maintained.

Question 1 (1 point) Question 1 Unsaved In a competitive market the equilibrium price is determined: Question 1 options: at the intersection of the firmâs demand and the market supply curves. at the intersection of the market demand and supply curves. at the intersection of the firmâs demand and marginal cost curves. so as to cover the costs of the potential firms. so as to cover the costs of the firms currently in the industry. Save Question 2 (1 point) Question 2 Unsaved If the perfectly competitive market demand for gym shoes is given by QD = 100 â P and the market supply is given by QS = 10 + 2P, then the equilibrium price and quantity will be: Question 2 options: P = 50 and Q = 50. P = 40 and Q = 90. P = 40 and Q = 60. P = 30 and Q = 70. P = 25 and Q = 75. 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A. A competitive firm

can consider only its location in setting the price.
must base its competitive price on product differentiation.
has the ability to set its own price.
must accept the price determined by the intersection of the market supply and demand curves.
has no supply curve.

B. If a firm is making an economic profit, then

the factors of production are being paid their opportunity costs.
there will be no change in the number of firms if the industry is perfectly competitive.
the factors of production are being paid less than their opportunity costs.
the factors of production are being paid more than their opportunity costs.
the firm will exit the industry

C. Along a downward-sloping monopoly demand curve,

marginal revenue is greater than price.
the elasticity of demand is constant.
marginal revenue decreases when the price decreases.
marginal revenue is equal to zero when the price is equal to zero

D. If, in the short run, a perfectly competitive firm is producing at a point where the total cost is greater than total revenue, then the firm should