Suppose a science museum charges $15 for admission, and each day 200 adults visit the museum. Suppose the museum directors cannot change the price they charge, but they know that for every $1000 a day spent on advertising they can increase demand by 50 tickets. The cost of operating the museum for a day is $2,000. Which of the following advertising choices should they make to maximize profits? O Spend $1000 a day on advertising Spend $2000 a day on advertising Spend no money on advertising O Spend $3000 a day on advertising
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- May and Raj me the only two growers who provide organically grown corn to a local grocery store. They know that if they cooperated and produced less corn, they could raise the price of the com. If they work independently, they will each earn 100. If they decide to work together and both lower their output, they call each earn 150. If one person lowers output and the other does not, the person who lowers output will earn $1 and the other person will capture the entire market and will earn 200. Table 10.6 represents the choices available to Mary and Raj. What is the best choice for Raj if he is sole that Mary will cooperate? If Mary thinks Raj will cheat, what should Mary do and why? What is the prisoners dilemma result? What is the preferred choice if they could ensure cooperation? A = Work independently; B = Cooperate and Lower Output. (Each results entry lists Rajs earnings first, and Marys earnings second.)Figure 12-6 Price (dollars per pound) 5 Market price 4 3 2 0 10 20 30 MC ATC D = MR 40 Quantity (thousands of pounds) Figure 12-6 shows the demand, marginal cost (MC) and average total cost (ATC) curves for Jason's House of Apples. Refer to Figure 12-6. Which of the following statements is true? O Jason cannot earn a profit from selling any number of apples. O Jason should produce where MC equals $3 (point d) where he will maximize his profit. O Jason should produce where MC equals $3 (point d) where he will minimize his losses. Jason should produce where the distance between MC and his demand curve is greatest (point b).Suppose that each firm in a competitive industry has thefollowing costs: Total cost: TC=50 + 1/2q^2 Marginal cost: MC=q where q is an individual firm’s quantity produced. The marketdemand curve for this product is Demand: QD = 120 – P where P is the price and Q is the total quantity of the good.Currently, there are 9 firms in the market. a. What is each firm’s fixed cost? What is its variable cost?Give the equation for average total cost. b. Graph average total cost curve and the marginal cost curvefor q from 5 to 15. At what quantity is average total cost curve atits minimum? What us marginal cost and average total cost at thisquantity? c. Give the equation each firm’s supply curve. d. Give the equation for the market supply curve for the shortrun in which the number of firms is fixed. e. What is the equilibrium price and quantity for this market inthe short run? f. In this equilibrium, how much does each firm produce?Calculate each firm’s profit or loss. Is there incentive for…
- usiness EconomicsQ&A LibraryTwo firms A and B produce an identical product (Note: Industry Output = Q). The firms have to decide how much output qA and qB (Note: qA = Firm A Output; qB = Firm B Output) they must produce since they are the only two firms in the industry that manufacture this product. Their marginal cost (MC) is equal to their average cost (AC) and it is constant at MC = AC = X, for both firms. Market demand is given as Q = Y – 2P (where P = price and Q = quantity). Select any value for X between [21 – 69] and any value for Y between [501 – 999]. Using this information, calculate the Industry Price, Industry Output, Industry Profit, Consumer Surplus and Deadweight Loss under each of the following models: (a) Cournot Model Two firms A and B produce an identical product (Note: Industry Output = Q). The firms have to decide how much output qA and qB (Note: qA = Firm A Output; qB = Firm B Output) they must produce since they are the only two firms in…Debbie, a popular wedding photographer, can photograph a wedding every Saturday of the year. She charges couples $4,000 for a complete set of photographs that cost her $2,200 to print and develop. Suppose that on one Saturday Debbie photographs her niece's wedding without charge, but her niece insists on paying Debbie $2,200 to cover her printing and developing costs. What is Debbie's economic profit of photographing her niece's wedding?Henry Potter owns the only wcU in town that pro-ducesclean drinking water. He faces the follO\\•ingdemand, marginal revenue, and marginal cost curves:Demand: P • 70 - QMarginal Revenue: MR • 70 - 2Q~arginal Cost: MC • lO + Qa. Graph these three curves. Assuming thatMr. Potter maximizes profit, what quantity docshe produce? What prioc does he charge? Showthese rcsuiiS on your graph.b. Mayor George Bailey, concerned about water con~sumcrs_. is considering a price ceiling that is10 percent below the monopoly price derived inpart (a). What quantity would be demanded atthis new price? Would the profit-maximizingMr. Potter produce that amount? Explain. (Hi11t:1hink about marginal cost.)c. George's Uncle Billy says that a price ceiling is abad idea because price ceilings cause shortages.Is he right in this case? What size shortage wouldthe prioc ociling create? Explain.d. George's friend Clarence, who is even more con~cerncd about consumers, suggests a price ceiling50 percent below the…
- The American market for shoes is a good example of monopolistic competition. In a situation where Adidas is earning a large economic profit in the short-run, Nikemay try to increase their advertising to capture some of that business, If Nike is successful in their campaign, what would happen to the demand curve for Adidas and the price at which they can sell?O a. The demand curve shifts up and to the right, and the price rises.O b. The demand curve shifts up and to the right, and the price falls.O c. The demand curve shifts down and to the left, and the price walls.O d. The demand curve shifts down and to the left, and the price rises.Oe. Nike cannot affect the demand for Adidas since this is a monopolistically competitive market.Imagine that you are advising a small new car dealership. They ask:A) given the information below, what is the best price they should put on all the cars, assuming every buyer pays the same price and how much profit will they make? B) is there a better way to make profits and how much profit could they make? why might this strategy be difficult to use? The firm can't change their costs. But they could use a different pricing scheme, not charging every customer the same price. Fixed cost for business is $4000 Variable cost is $20,000 for each car they get from the manufacturer. They anticipate the following customers. Ms. Rich would pay up to $30,000 Mr. Upper Middle would pay up to $26,000 Ms. Middle would pay up to $22,000 Mr. Lower Middle would pay up to $18,000 Ms. Poor would pay up to $16,000Suppose pretzel stands in New York City are aperfectly competitive market in long-run equilibrium.One day, the city starts imposing a $100 per monthtax on each stand. How does this policy affect thenumber of pretzels consumed in the short run andthe long run?a. down in the short run, no change in the long runb. up in the short run, no change in the long runc. no change in the short run, down in the long rund. no change in the short run, up in the long run
- Suppose that each firm in a competitive industry has the following costs: Total cost: TC = 50 + 1/2q2 Marginal cost: MC = q Where q is an individual firm’s quantity produced. The market demand curve for the product is: Demand: QD = 120 – P Where P is the price and Q is the total quantity of the good. Currently there are 9 firms in the market. What is each firm’s fixed cost? What is its variable cost? Give the equation for average total cost. Graph the average-total-cost curve and the marginal-cost curve for q from 5 to 15. At what quantity is the average-total-cost curve at its minimum? What is the marginal cost and average total cost at that quantity? Give the equation for each firm’s supply curve. Give the equation for the market supply curve for the short run in which the number of firms is fixed. What is the equilibrium price and quantity for the market in the short run? In this equilibrium, how much does each firm produce? Calculate the firm’s profit and loss. Do firms have…The table below shows the weekly marginal cost (MC) and average total cost (ATC) for Buddies, a purely competitive firm that produces novelty ear buds. Assume the market for novelty ear buds is a competitive market and that the price of ear buds is $6.00 per pair. Quantity of Ear Buds MC ($) ATC ($) 10 - 5.00 15 2.00 4.00 20 2.44 3.61 25 3.56 3.60 30 4.02 3.67 35 5.49 3.93 40 5.93 4.18 45 8.59 4.67 Instructions: In part a, enter your answer as the closest given whole number. In parts b–d, round your answers to two decimal places. a. If Buddies wants to maximize profits, how many pairs of ear buds should it produce each week? _ pairs b. At the profit-maximizing quantity, what is the total cost of producing ear buds? $ _ c. If the market price for ear buds is $6 per pair, and Buddies produces the profit-maximizing quantity of ear buds, what will Buddies profit or loss be per week? $ _ d. Now assume the market price is $5.50 per…Suppose that the market for chicken momos is perfectly competitive with ten firms producing momos. Tasty treat is one of the ten price-takers in the market for momos. The accompanying tables show the demand schedule for momos in Dhaka and cost schedule for "Tasty Treat". DEMAND SCHEDULE Price (BDT per plate) Quantity demanded (plate per hour) 10 900 25 675 30 600 40 450 50 300 70 0 COST SCHEDULE OF TASTY TREAT Output (plate per hour) Marginal Cost (BDT per extra plate) Average Variable Cost (BDT per plate) Average total cost (BDT per plate) 40 20 25 90 50 10 10 75 60 30 20 55 70 50 23 50 80 70 35 60 90 85 50 77 a) What is the value of the shut-down price and break-even price for Tasty Treat?How did you figure that out?b) Write down the individual supply schedule of chicken momos for Tasty Treat and the industry supply schedule for chicken momos.c) Plot the market demand and supply curves for chicken momos and find the equilibrium price and…