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

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ECON 2150A/B Full Course Notes

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Besanko & braeutigam microeconomics, 4th editionsolutions manual. Perfectly competitive markets: a firm sells a product in a perfectly competitive market, at a price of . The firm has a fixed cost of . Fill in the following table and indicate the level of output that maximizes profit. More generally, explain how the level of fixed cost affects the choice of output: a bicycle-repair shop charges the competitive market price of per bike repaired. Using your graph, state (approximately) the profit-maximizing quantity in each case: dave"s fresh catfish is a northern mississippi farm that operates in the perfectly competitive catfish farming industry. 2, where is the number of catfish harvest per month. Besanko & braeutigam microeconomics, 4th editionsolutions manual: ron"s window washing service is a small business that operates in the perfectly competitive residential window washing industry in evanston, illinois.

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Assume that a firm in a perfectly competitive market can sell its product for $35 (ie price per unit of output). Furthermore, it faces the following costs:

Output (Q)	Total Cost
0	25
1	50
2	100
3	120
4	155
5	190
6	250
7	390

a) Calculate Total revenue (TR), Marginal Cost (MC), Fixed Cost (FC), Variable cost (VC), and Average Cost (AC).
b) What is the profit-maximizing output level?
c) Is this firm is making a profit or loss at the profit-maximizing output level? Explain.
d) Do you think the firm will continue its production in the short run?
e) What will be the long-run price in this market?

tealwombat791

2. (a) Consider a perfectly competitive firm with the following total cost function in the short run:

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STC = 100 + 100Q+ 5Q^2 + (1/3)Q^3

Given the market price of its product is P=$300 per unit, determine its profit-maximizing output and profit for the short run.

(b) Now suppose its long-run total cost is:

LTC= 54Q - 2.4Q^2 + 0.03Q^3

Indicate the firmÃ¢â¬â¢s long-run price, quantity sold, and profit, assuming the industry is in long-run equilibrium.

whitecicada813

PROFIT MAXIMIZATION

Reminders:

Q: Quantity, TC: Total Costs, VC: Variable Costs, MC: Marginal Costs, MR: Marginal Revenue, TR: Total Revenue

1. Suppose the market for DVD movies is perfectly competitive. The industry price for the movies is $24, and a typical firm has the following total cost data:

Q	TC	VC	MC	MR	TR	Net Profit
0	10
1	33
2	53
3	70
4	90
5	114
6	143

a. Calculate the TR, MR, and MC for each level of output.

b. What condition must be met for the firm to maximize profits? What is the profit maximizing level of output and price for this firm? How much profit would be made?

2. Now suppose that some firms have been able to differentiate their DVDs, and the market has become monopolistically competitive. A typical firm now has the following demand schedule and total cost data:

Q	P	TC	VC	MC	MR	TR	Net Profit
0	40	8
1	35	20
2	30	28
3	25	40
4	20	56
5	15	76
6	10	100

a. Calculate the TR, MR, and MC for each level of output.

b. What condition must be met for the firm to maximize profits? What is the profit maximizing level of output and price for this firm? How much profit would be made?

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

ECON 2150A/B Full Course Notes

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