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A manufacturer of electronics products is considering entering the telephone equipment business> It estimates that if it were to begin making wireless telephones, its short-run cost function would be as follows:
Q (thousands)
AVC ($)
AC ($)
MC ($)
13
37.90
45.59
31.90
14
37.60
44.74
33.70
15
37.50
44.17
36.10
16
37.60
43.85
39.10
17
37.90
43.78
42.70
18
38.40
43.96
46.90
19
39.10
44.36
51.70
20
40.00
45.00
57.10
1. Plot the average cost, average variable cost and marginal cost on a graph.
2. Suppose that the wholesale price of a wireless phone is currently $50, what is the profit maximizing output level?
3. How much is the total profit of this company?
4. Suppose that the firm does enter the market and that overtime increasing competition causes prices of telephone to fall to $35, how much is the new production level?
5. How much is the profit (loss) when the price drops to $35?
6. Should the firm stay in business or shut down in the short run if the price is $35?
Suppose that a typical firm in a monopolistically competitive industry faces a demand curve given by:
q = 60 − (1/2)p, where q is quantity sold per week.
The firm’s marginal cost curve is given by: MC = 60.
- How much will the firm produce in the short run?
- What price will it charge?
In addition to providing the quantitative answers for the question, please also describe the approach you used to arrive at your conclusions.
Suppose you make a loan of $100 that will be repaid to you in 1 year.if the loan is denominated in terms of nominal interest rate, are you happy or sad if inflation is higher than expected during the year. What if the loan instead had been denominated in terms of a real return.
Given:
1. Y=C+I+G+ X-M
2. C=b+cYd (Consumption function)
3. T=s+tY (tax function)
4. Mn + mY (import function)
5. Yd=Y-T (disposable income)
6. C = 100 + .90Yd
7. T = 40 + .20Y
8. M = 10 + .05Y
9. I = 38 G = 75 X = 25
Questions:
1. Calculate the equilibrium level of income using the model Y=C+I+G+X-M. 2. Determine the size of the new multiplier (import multiplier) for this economy.
consider the goods market equilibrium condition in a closed economy, S+TA-TR=I+G. use this equation to explain why in the classical case of fiscal expansion must lead to full crowding out. Explain using the same equation, what happens to the economy when there is less than full employment
why does exchange rate always overshoot its long run equilibrium following a monetary expansion? explain
mux=120-10x
muy=160-20y
price of x=rs.10/=
price of y= rs.20/=
income=220/=
calculate the total utility from the consumption of 4 units of good x and 5 units of good "y
using appropriate diagrams show the impact of a fiscal contraction on output, interest rate and price level under classical and keynesian supply conditions.
Consider an economy in medium run equilibrium. Examine the medium run impact of an increase in petroleum prices on the level of output and the rate of unemployment in this economy.
an increase in monetary growth leads to decrease in nominal interest rates in the short run, but to an increase in nominal interest rates in the medium run. Explain.
