Search & Filtering
The demand for milk and supply of milk in the U.S: QD = 152 – 20 P , Qs = - 4 + 188 P
Q: measured in billions of gallons per year P is measured in dollars per gallons.
1) Calculate the competitive market equilibrium price and quantity and total surplus at that price. Illustrate your answer.
2) If price floor Pf = $1.25, how much do the government pay to buy the excess supply?
Suppose a competitive firm has long run total costs TC = 300 + 5 Q + 3 Q2. MC = 5 + 6 Q Now a tax is imposed on the firm—for each unit of output produced, it must pay $ 15 in taxes. Derive the new MC curve. What is minimum ATC? At what output does this occur?
A firm has
MC = 10 + Q and AVC = 10 + Q / 2
If FC = 5,000 and the market price is 100, findthe firm’s maximum profit. Will the firm continue to operate in the SR? In the LR? Explain
A firm has short run TC:
TC = 100 + 2 Q + Q2 with MC = 2 + 2 Q
1) Find ATC and AVC functions
2) If P = 25, how much will the firm produce in the SR?
3) If P = 20, how much will the firm produce in the SR?
4) Assuming the firm has the same cost curves in the LR, how much will it produce in the LR?
Your company is currently producing at Q = 200 units/ month. FC = $ 500 / month.
At the current output level: MC = $ 10 = ATC
At Q = 150, MC = $ 6 = AVC
The market price Pm = $ 8.
If your goal is profit maximization, should you continue at Q = 200, increase Q above 200, or reduce Q below 200? Would you do better to shut down?
• The assumption of price-taking in perfectly competitive market is justified when there are a large number of buyers and sellers in the market. In large cities, there are many restaurants and many radio stations. Would you describe the restaurant market and the market for radio advertising as perfectly competitive? Explain whether the other assumptions are satisfied.
There are two workers. Each worker’s demand for a public good is P =20 -
Q. The marginal cost of providing the public good is $24. The accompanying graph summarizes the relevant information.
a. What is the socially efficient quantity of the public good?
b. How much will each worker have to pay per unit to provide the socially
efficient quantity?
1. A local gym owner knows that there are two types of customers: type 1 is serious about fitness while type 2 is the casual gym go-er. He has no fixed cost and the marginal cost of providing an extra unit of service is 1/-. He has the following information
· There are consumers of type 1 each with the demand curve
· There are consumers of type 2 each with the demand curve
How does his optimal strategy depend on the relative size of and if he adopts a two-part tariff pricing1.
Following information shows that a firm offering a good at different prices to groups of consumers with different levels of willingness to pay.
Inverse Demand for movies: P1 = 20 – 4Q1
Inverse Demand for students: P2 = 10 – Q2
MC = 4Q LKR /ticket
(a) What price and quantity and maximizes profits if the firm charges each market?
(b) Demonstrate that charging different prices for the two groups results in higher profits than charging the same price for everyone.
Following information shows that a firm offering a good at different prices to groups of consumers with different levels of willingness to pay.
Inverse Demand for movies: P1 = 20 – 4Q1
Inverse Demand for students: P2 = 10 – Q2
MC = 4Q LKR /ticket
(a) What price and quantity and maximizes profits if the firm charges each market?
(b) Demonstrate that charging different prices for the two groups results in higher profits than charging the same price for everyone.
