Question.2994 - Homework: Problem Sets 1. The widget industry is perfectly competitive. The industry demand and supply functions for widgets are given below. Q d = 424 – 40P Q s = 40 + 8P a. What is the equilibrium price and quantity for the industry? b. If the government establishes a price floor of $9, explain what will result in terms of excess demand or supply. c. If the government establishes a price ceiling of $6, explain what will result in terms of excess demand or supply. d. Assume the supply curve shifts to Q s ’ = 34 + 12P What is the new equilibrium price and quantity? e. Assume in addition to the supply curve shifting, the demand curve shifts to Q d ’ = 484 – 38P What happens to equilibrium price and output?2. Below is a table with total data for a firm in a perfectly competitive industry.Quantity Total Cost 0 100 10 220 15 300 20 360 25 450 30 600 35 77040 960a. What is the marginal cost and average total cost for the firm at each level of output? b. If the prevailing market price is $34 per unit, how many units will be produced and sold? What are the profits per unit? What are total profits? c. Is the industry in long run equilibrium at this price? If not, what do you expect to happen to price over time?3. Jones Company operates within a monopolistically competitive industry. The estimated demand for its products is given by the following inverse demand function P = 1760 – 12Q It finance department has estimated its total cost function as TC = 24,000 + 5 Q – 15 Q 2 + 0.333 Q 3 a. What is the level of output that maximizes short run profits? Hint: Profit is maximized when MR=MC b. What is the profit maximizing price? c. What are total profits? d. What is the effect of an increase in fixed costs of $5000 on equilibrium price and output? 4. Ajax, Inc. is a monopolist. The estimated demand function for its product is Q d = 120 – 0.8P + 12Y + 4A Where Q d denotes quantity demanded, P denotes price, Y denotes personal income (in thousands of dollars), and A denotes advertising expenditures in hundreds of dollars. Ajax’s marginal cost function is given as MC = 21 + 4Q Assume Y equals 3 and A equals 3 and fixed costs equal $1000 a. What is the inverse demand function? (The equation demand equation in the form P = a – bQ d )? b. What is the profit maximizing price and quantity of output for Ajax, assuming it is an unregulated monopoly? What are its profits?c. If fixed costs increase to $1200, what will happen to equilibrium price and quantity?
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The xxxxxx industry xx perfectly xxxxxxxxxxx The xxxxxxxx demand xxx supply xxxxxxxxx for xxxxxxx are xxxxx below x d x Q x P x What xx the xxxxxxxxxxx price xxx quantity xxx the xxxxxxxx The xxxxxxxxxxx price xxx quantity xxx be xxxxxxxxxx by xxxxxxxxxxxxxx solving xxx market xxxxxx and xxxxxx curves xxx Q xxx P x P x Or x Or x Q x b xx the xxxxxxxxxx establishes x price xxxxx of xxxxxxx what xxxx result xx terms xx excess xxxxxx or xxxxxx Qd x units xxx Qs xxxxx There xxxx be xxxxxx supply x If xxx government xxxxxxxxxxx a xxxxx ceiling xx explain xxxx will xxxxxx in xxxxx of xxxxxx demand xx supply xx - xxxxx and xx Units xxxxx will xx excess xxxxxx d xxxxxx the xxxxxx curve xxxxxx to x s x What xx the xxx equilibrium xxxxx and xxxxxxxx - x P xx P xx P x - x Assume xx addition xx the xxxxxx curve xxxxxxxx the xxxxxx curve xxxxxx to x d x What xxxxxxx to xxxxxxxxxxx price xxx output x P xx P xx P x Below xx a xxxxx with xxxxx data xxx a xxxx in x perfectly xxxxxxxxxxx industry xxxxxxxx Total xxxx Marginal xxxx Average xxxx a xxxx is xxx marginal xxxx and xxxxxxx total xxxx for xxx firm xx each xxxxx of xxxxxx b xx the xxxxxxxxxx market xxxxx is xxx unit xxx many xxxxx will xx produced xxx sold xxxx are xxx profits xxx unit xxxx are xxxxx profits xxxxxxxxxxx Quantity xxxx be xxxxx MR xx MR xx at xxxx units xxx sold xxxxxxx Cost xxxxx Profit x Profit xxxx - x Is xxx industry xx long xxx equilibrium xx this xxxxx If xxx what xx you xxxxxx to xxxxxx to xxxxx over xxxx No xx the xxxx run xxx not xx equilibrium xx the xx increases xxxx the xxxxxxxx in xxxxxx So xx is xxxxxxxx that xxx price xxxxx increase xx the xxxx run xxxxx Company xxxxxxxx within x monopolistically xxxxxxxxxxx industry xxx estimated xxxxxx for xxx products xx given xx the xxxxxxxxx inverse xxxxxx function x Q xx finance xxxxxxxxxx has xxxxxxxxx its xxxxx cost xxxxxxxx as xx Q x Q x What xx the xxxxx of xxxxxx that xxxxxxxxx short xxx profits xxxx Profit xx maximized xxxx MC x Q x TR x Q xx - x MR xx - x - x Q x Q- x b xxxx is xxx profit xxxxxxxxxx price xxxxx - x What xxx total xxxxxxx Revenue xxxx Profit x d xxxx is xxx effect xx an xxxxxxxx in xxxxx costs xx on xxxxxxxxxxx price xxx output xxxxx will xx no xxxxxx in xxx Equilibrium xxxxx and xxxxxx as xxxxx cost xx not xxxx any xxxxxx on xxxxxxxx cost xx revenue xxxx Inc xx a xxxxxxxxxx The xxxxxxxxx demand xxxxxxxx for xxx product xx Q x P x A xxxxx Q x denotes xxxxxxxx demanded x denotes xxxxx Y xxxxxxx personal xxxxxx in xxxxxxxxx of xxxxxxx and x denotes xxxxxxxxxxx expenditures xx hundreds xx dollars xxxx s xxxxxxxx cost xxxxxxxx is xxxxx as xx Q xxxxxx Y xxxxxx and x equals xxx fixed xxxxx equal x What xx the xxxxxxx demand xxxxxxxx The xxxxxxxx demand xxxxxxxx in xxx form x a xx d x d x Y x Q x P x - x P x Q x What xx the xxxxxx maximizing xxxxx and xxxxxxxx of xxxxxx for xxxx assuming xx is xx unregulated xxxxxxxx What xxx its xxxxxxx MR xx - x Q x Q xxxxx P x P xxxxxxx MC x TC x Q xx TC xxxxxx - x If xxxxx costs xxxxxxxx to xxxx will xxxxxx to xxxxxxxxxxx price xxx quantity xxxxx will xx no xxxxxx as xxx equilibrium xxxxx and xxxxxxxx is xxxxxxxxx upon xxxxxxxx cost xxxxx is xxx affected xx the xxxxxx in xxxxx costMore Articles From Economics
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