Assignment 3.1 Techinal Questions Essay

This graph is specific to an oligopoly and shows the change in quantity demanded in relation to the change in price for both elastic and inelastic goods. Total Revenues will be increased, if the firm decreases their price but increase their quantity. Due to the fact that the costs remain the same, the revenue line on the graph can be seen to be steeper than the costs meaning that the profit is higher. The graph therefore also indicates the point where the firm is able to make the most amount of profit, in relation to the price they set and the quantity they produce.

d. Calculate the price elasticity of demand in each market and discuss these in relation to the prices to be charged in each market.

Explain how a profit maximizing firm determines its optimal level of output, using marginal revenue and marginal cost as criteria:

* In Assignment 1, you determined your firm’s market demand equation. Now you need to find the inverse demand equation. Having found that, find the Total Revenue function for your firm (TR is P x Q). From your firm’s Total Revenue function, then find your Marginal Revenue (MR) function.

(7) A monopolist can discriminate prices for his product, a firm working under perfect competition cannot. The monopolist will be increasing his total profit by price discrimination if he find? Elastic ties of demand are different in different markets.

a.) Draw and properly label the demand and supply graphs (this means you must label the axes and any lines you include on the graph).

The food trucks affected the local production curves for the restaurant meal industry by drawing more customers to their food truck meal industry. The more customers the food truck meal industry have, the lesser the restaurant’s customers would have. Therefore, the restaurant’s customers would decrease as the food truck’s customers increases and the business will eventually fail. For example, if initially, the restaurant meal industry doesn’t have a competition with the food truck meal industry, they have 200 customers a day and 0 customers for the opponent. And when Bobby started his food truck business, he drew 120 new customers to his new food truck that attracted 50 of the customers from the restaurant. Another food truck joined, and the customers increased to 170. The more food trucks and the faster they evolve, the more customers would be attracted, consequently, 0 customers left for the restaurant meal industry—the business fails.

1. Please conduct a financial ratio analysis using the data in Exhibit 2. How do the results reflect different strategies pursued by the 4 firms?

In the short run the perfect competition equilibrium can be found by graphing the marginal cost (MC), average total cost (ATC) and marginal revenue (MR) curves. In perfect competition the price is equal to the average revenue, which is equal to the marginal revenue and these are all constant, giving an infinitely elastic demand curve for the firm. The demand curve is “perfectly price elastic” due to the homogeneity of the products supplied, where each supplier, as a price taker, must focus on a single price. Given this, the only choice a supplier has in the short run is how much to produce. For profit maximisation to occur marginal costs (supply curve) must equal marginal revenue (demand curve). Profit maximisation is assumed to mean the maximisation of normal economic profit (i.e. revenue that covers the

7. Which of the following must be true if a firm is experiencing economies of scale?

11) By how much would the profit contribution of product A has to increase before it will be profitable to produce A?

22) The above figure shows a graph of the market for pizzas in a large town. At a price of $14, there will be A) no pizzas supplied. B) equilibrium. C) excess supply. D) excess demand. Answer: C 23) The above figure shows a graph of the market for pizzas in a large town. At a price of $5, there will be A) excess demand. B) excess supply. C) equilibrium. D) zero demand. Answer: A 24) The above figure shows a graph of the market for pizzas in a large town. What are the equilibrium price and quantity? A) p = 8, Q = 60

6. There is rich cost data given in the case. This must be used to understand how much profits / market share LT can achieve at various production levels ( we must assume that they product what they sell)

Q.3 Why Superior Improved Profitability during the period January 1 to June 30, 2005? How useful was the data in Exhibit 4 for the purpose of this analysis?

a) Draw Brennan's average total, marginal revenue and marginal cost curves. (Hints: calculate total revenue (P* times Q) first, and then calculate MR)