State whether the following statements are correct or not and briefly explain why A. Diseconomies of scale justify horizontal expansion of firms into unrelated fields. B. Economies of scale lead to a downward sloping marginal cost curve C. Elasticity of demand remains constant throughout the product cycle
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State whether the following statements are correct or not and briefly explain why
A. Diseconomies of scale justify horizontal expansion of firms into unrelated fields.
B. Economies of scale lead to a downward sloping marginal cost curve
C.
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- QUESTION 2 (a) Use the concepts of economies and diseconomies of scale to explain the shape of a firm’s long-run ATC curve. What is the concept of minimum efficient scale? What bearing can the shape of the long-run ATC curve have on the structure of an industry? (b) If a firm in monopoly maximizes revenue, does it automatically maximize profit too? Explain the content with relevant example and diagrams.In a price-taker market, if a business produces efficiently (i.e., that is, where marginal revenues = marginal costs), the firm will be able to make at least a normal profit. True of False. Explain. All firms produce where MR=MC. Price takers produce and price where P=ATC=MC=MR. That is the "normal profit" level. Profits above that level are considered "economic profits." Review economic profits, normal profits, explicit costs, and implicit costs. Why is 'normal profit' considered to be a cost, in economics?Answer "False" or "True" each of the following. Justify by relying on graphical analysis whenever possible. 1.- A company in perfect competition will maximize profits by equating average income to its marginal cost. 2.- For a company in perfect competition, the demand it faces is equal to the marginal product which is constant. plzz ansr first two
- Explain manufacturing firms should use demand leading instead of demand trailing capacity strategy.Following is Ahmed’s competitively firm data and solve all the parts and subparts: Output (Q) Total Cost Total Revenue 0 62 0 30 90 40 60 110 80 90 126 120 120 138 160 150 150 200 180 165 240 210 190 280 240 230 320 270 296 360 a. Find the profit maximizing output. b. Find: a. FC b. VC c. ATC d. AFC e. AVC f. MC c. Find the efficient scale of output. d. Draw all the curves for the variables in part b using two-dimensional space.c) Assume that the market price for bagel services is 42 and store produces 30 units of the bagel. Calculate theprofit level. Is the store profit maximizing? Explain your answer. d) Go back to part c) and assume that there are 100 identical bagel store in the market. Determine the market supply curve. (You will obtain total market quantity, Q, as a function of price,P). Are elasticities of individual firm supply and market supply curves different? e) Given the market supply curve you have calculated in part d), now assume that market demand forhairdressers are given by Q=2900-50P. Find the equilibrium price and quantity in the market. Does the marketequilibrium correspond to long-run equilibrium? Explain
- Problem 3 : Perfect competitionThe firm’s production function has the following form: Q = f(L) = √L, where L is the numberof employees. Fixed cost is $10, wage is $1, and the buyers pay the firm $10 for its product.a) For the levels of quantity of 0, 1, 2, 3, 4, 5, 6, and 7:• Calculate the fixed cost, the variable cost, the total cost, the total revenue, and theprofit.• If the firm wants to maximize profit, what level of output should it choose?b) For the change in quantity from 0 to 1, from 1 to 2, …, from 6 to 7:• Calculate the marginal product of labor, the marginal cost, and the marginalrevenue.• Is the marginal product of labor diminishing?• On a graph, show the marginal cost and the marginal revenue. Put the pointsbetween the whole numbers. Make sure you label the axes and the curves. Show thepoint where the two curves cross. c) Provide a brief explanation for the following questions:• Is the firm operating on a perfectly competitive market?• Is the market in the long-run…1- Suppose that the total cost function of a firm is given as follows;TC = 500 + 2Q2And the price of the firm’s product is determined by the market equilibrium at $100.a- Set the profit maximizing condition . Find the profit maximizing output level for this firm .b- What is the total revenue ?c- What is the total cost ?d- What is the profit earned by the firm ?e- Illustrate your answer by using a well-labeled graph .f- Denote the break even price level with Pb on the same graph .g- Denote the shut down price level with Ps on the same graph.h- Show the firm’s supply curve on the same graph .i- Does the firm function in short-run or long-run ? Why ?Using the table (Check if the values are correct), answer the questions below: a. What is the firms total fixed cost b. Suppose the price of the product is 20 - What is the firms output level? - What is its profit (or loss)-per-unit at that output level? $ - What is its total profit? $ c. Now suppose the price of the product is $10. - What is the firm’s profit-maximizing output level? - What is the firm's profit or loss per-unit? $ - What is the firm's total profit (or loss)? $ d. At a price of $10, will the firm produce? e. If the price remains $10, what will happen to this firm in the long-run?
- Use the following data to analyze the condition when the product proce is set at $32 Assume the following unit cost data are for a purely competitive producer. See table below: Required: A. What will be the profit maximizing or loss- minimizing output? B. How much would be the economic profit that the firm will realize per unit of output? C. How much would be the product price for the firm to be at a shutdown position?Suppose that each firm in a competitive pizza market has the following identical cost: Total cost: TC=25+1.5Q2i. Formulate the equation or level of fixed cost, variable cost, marginal cost, average variable cost (AVC) and average total cost (ATC) for each firm.ii. Sketch a diagram to illustrate average total cost (ATC) and marginal cost (MC) for Q from 1 to 20. Identify the quantity at which the average total cost (ATC) reaches its minimum and interpret its economic or business implication.iii. An innovation was diffused widely among all firms in the market. Adoption of this innovation will help to reduce 20% of the variable cost for any given level of production while all other factors remain the same. A firm needs to pay a fee of $5 to adopt the innovation. Formulate the new production cost functions (TC, TFC, TVC, ATC and MC) for each firm.(Suggested word count: 300-350 words)2. Two cereal firms that set prices and sell differentiated products propose to merge. Firm 1sells CrunchyCrunch for a price of $10 with a marginal cost of $6. Firm 2 sells FibryFibre for aprice of $12 and a marginal cost of $6.(a) When the price of CC rises, 20% of its lost demand goes to FF. What is the marginal costreduction for CC that is required to offset the upwards pricing pressure on the CC price?(b) You are employed as a consultant by the merging firms. You know that the DOJ knowsthat the marginal cost of FF will fall by 50 cents as a result of the merger, but that the agency isunsure of the diversion between FF and CC. How small will you need to claim that the diversionis in order for there to be no net upwards pricing pressure on the CC price?