aymaneelkhoumssi2004

A perfectly competitive firm faces a market-determined price of $25 for its product, and its total cost for different quantities of output are shown below.  Answer each question (a through g) below.  The correct answer to each is worth five points.  If you get correct answers to each question a through g, you will receive 35 points, which is an extra two points over the basic 33 points for a Roman numeral question.

1.  The firm’s total costs are given below.  Fill in columns 3 and 4 for average total cost and marginal cost.
2. Fill in columns 5 and 6 for marginal revenue and profit margin.
3. How much output should the competitive firm produce?  Explain why.
4. Draw the marginal cost, average total cost curve, and marginal revenue curve for the firm.
5. Fill in column (7) on total profit.  Does your answer from column (7) agree with your answer to part c?  If not, explain why.
6. Identify the profit maximizing level of output on your diagram from part d.
7. Suppose the demand for the industry product decreases and the price falls to $14.  What quantity should the firm produce now?  How much is profit? 

(1)                       (2)             (3)             (4)                   (5)                   (6)                      (7)

Quantity          TC          ATC             MC                  MR      profit per unit     Total profit

000                  1000

100                  2000

200                  3300

300                  4800

400                  7000

500                  8000

Suppose that instead of price discriminating, the Bills are able to charge a two-part price including a fixed fee for entry and a price per game. If the marginal cost of attendance is $0, what is the optimal fixed fee per fan (again assuming that all have the same demand curve)?

10. Biology is made up of many overlapping fields, each of which uses different tools to gather information about living things. Fill out the table below with information about two fields of biology -one that appeals to you, and one that does not. Include a description of each field and the tools scientists in the field use, as well as your impressions of each.

6) For U.S. consumers, the income elasticity of demand for fruit juice is 1.1. If the economy enters a recession next year and consumer income declines by 2.5%, what is the expected change in the quantity of fruit juice demanded next year?

A) +27.5% B) -27.5% C) +2.75% D) -2.75%

Discuss the prime duty of the government to its citizens and vice versa.

Solex Ghana Ltd produces the Solex fruit juice. The firm’s supply function can be specified as
𝑄𝑥
𝑠 = 120 + 12𝑃𝑥 − 3𝑃𝑖 + 10𝐸𝑝 and the estimated market demand for the juice is 𝑄𝑥
𝑑 = 210 −
8𝑃𝑥 + 4𝑃𝑦 − 10𝑃𝑧 + 0.02𝐼 + 0.1𝐴.
Where:
𝑄𝑥
𝑠
and 𝑄𝑥
𝑑
the quantities supplied and demanded of Solex fruit juice respectively,
Px is the price of Solex fruit juice,
Pi is the cost per unit of the input used in producing Solex fruit juice and
Py and Pz are the prices of good Y and Z which are related goods to Solex fruit juice
Ep is the supplier’s expectation about future prices.
I represent income and
A represent amount of advertisement spent on Solex fruit juice
Suppose input cost is GH₵ 100 per unit, supplier’s expectation about future price is GH₵ 20, the
unit price of both goods Y and Z is GH₵ 10 and the company spends GHs 500 on advertisement
with consumer’s income being GHs 1000.
 

   a) Derive new equations for quantity demanded and quantity supplied as a function of only
the price of Solex fruit juice. [2 Marks]
   b) Determine the equilibrium price and quantity for Solex fruit juice. [3 Marks]
   c) Sketch your results under (b) [2 Marks]
   d) Compute appropriate value(s) to determine the type of goods Y and Z are to Solex fruit
juice. [3 Marks]
   e) Compute an appropriate value and explain whether Solex fruit juice is a normal or inferior
product. [3 Marks]
   f) Based on your answer to (b) above, suppose the local authority imposes a price control of
GH₵ 6.00 on Solex fruit juice
       i. what type of price control is this? [1 Mark]

2
       ii. what is/are the likely effect(s) of this policy on the market? [2 Marks]
       iii. Calculate the value of the shortage or surplus after the price control. [2 Marks]
   g) After realizing the effect(s) of the price control under (f), the local authority consulted you
and asked for policy advice on an alternative policy that can also lead to a price of GH₵
6.00 for the Solex fruit juice but with no shortage or surplus on the market.
       i. What type of policy intervention will you recommend? [2 Marks]
       ii. Based on the identified policy above and given that the local authority wants the
final price to be paid by consumers to be 6 cedis per unit, determine the value of
the policy to be imposed or granted per unit. [3 Marks]
       iii. Determine the total value that will accrue to the local authority or that should be
paid to producers of Solex fruit juice as a result of the policy you recommended
under (ii).