What is a price taker? A price taker is A. a firm with a perfectly inelastic demand curve. B. a firm that has the ability to charge a price greater than marginal cost. C. a firm that is unable to affect the market price. D. a firm that does not seek to maximize profits.
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- Since a perfectly competitive firm can sell as much as it wishes at the market price, why can the firm not simply increase its profits by selling an extremely high quantity?A market in perfect competition is in long-run equilibrium. What happens to the market if labor unions are able to increase wages for workers?How much should the firm produce to maximize its profit? What is the firms AR? What is the firms MR? How much is the firms total revenue based on the profit maximization rule? How much is the firms total cost? How much is the firms total profit?
- DuopolyMarket for mechanical pencils can be described by the following demand schedule:Price | Number of pencils demanded$6 | 80$5 | 200$4 | 320$3 | 440$2 | 560$1 | 680$0 | 800The fixed cost is $340, while the variable cost is $0.50.a) For each price, find the total revenue, the total cost, and the profit.b) If the market was under perfect competition, what would be the price and the quantity ofpencils traded in the long run? Why?c) If there was only one seller on the market, what would be the price and the quantity ofpencils traded? Why?DuopolyMarket for mechanical pencils can be described by the following demand schedule:Price | Number of pencils demanded$6 | 80$5 | 200$4 | 320$3 | 440$2 | 560$1 | 680$0 | 800The fixed cost is $340, while the variable cost is $0.50.a) For each price, find the total revenue, the total cost, and the profit.b) If the market was under perfect competition, what would be the price and the quantity ofpencils traded in the long run? Why?c) If there was only one seller on the market, what would be the price and the quantity ofpencils traded? Why?d) If there were two firms on the market and they agreed to cooperate, how much would eachfirm need to produce? Follow the procedure outlined in the lecture and show that the otherfirm would prefer to deviate from the agreement.e) When the firms deviate from the agreement, there is a new optimal level of output. Showwhether the firms have an incentive to deviate from that level?f) If there were two firms on the market, what would be the price and the…From the given information, draw the demand curve, MR, MC and ATC curve Output Price TR MR TC ATC MC Profit 1 $300 $300 - $1,000 $1,000 - - 2 $300 $600 $300 $1,500 $750 $500 -$200 3 $300 $900 $300 $1,800 $600 $300 $0 4 $300 $1,200 $300 $2,000 $500 $200 $100 5 $300 $1,500 $300 $2,300 $460 $300 $0 6 $300 $1,800 $300 $2,850 $475 -$550 -$250 7 $300 $2,100 $300 $3,710 $530 -$860 -$560
- Quantity sold Price 3 $10 4 $10 5 $10 (a) In the above table, if the firm sells 5 units of output, what's total revenue? (b) In the above table, if the quantity sold by the firm rises from 3 to 4, what's marginal revenue? (c) In the above table, if the quantity sold by the firm rises from 5 to 6, what's average revenue?a) What is the profit maximising condition in a market with perfect competition?b) Explain what is meant by abnormal profit? What is the adjustment process from short-run abnormal profit to long-run equilibrium in a perfectly competitive market?c) Please find below Pricing options for firm A and B, along with individual payoffs (Firm A’s payoff/Firm B’s payoff)Firm BFirm APrice £2 Price £1Price £2 £20,000/£20,000 £10,000/£24,000Price £1 £24,000/£10,000 £12,000/£12,000Assume you are the pricing manager at Firm A;i) What is your payoff for a ‘maximin’ strategy?ii) What is your payoff for a ‘maximax’ strategy?iii) Does a dominant strategy exist within this prisoners’ dilemma?Question 3: The situation facing by firm “Smart”, a producer of running shoes, is shown in the following figure. Figure attached and can see in end What quantity does Smart Shoes produce? Answer: 2. What is the price of a pair of Smart shoes? Answer: 3. What is Smart’s economic profit or economic loss? Answer: 4. Why MR curve is below to demand curve? Answer: Question 4: In the market for running shoes, all the firms face a similar demand curve and have similar cost curves to those of Smart in question 3. a.) What happens to the number of firms producing running shoes in the long run? Answer: b.) What happens to the price of running shoes in the long run? Answer: c.) What happens to the quantity of running shoes produced by Smart in the long run? Answer: d.) What happens to the quantity of running shoes in the entire market in the long run? Answer: e. ) Does Smart shoes have excess capacity in the long run? Answer: f.) Why, if Smart firm shoes has…
- 3. The components of marginal revenueJabari's HookNLadder is the only company selling fire engines in the fictional country of Alexandrina. Jabari initially produced eight trucks, but then decided to increase production to nine trucks. The following graph gives the demand curve faced by Jabari’s HookNLadder. As the graph shows, in order to sell the additional fire truck, Jabari must lower the price from $80,000 to $60,000 per truck. Notice that Jabari gains revenue from the sale of the additional engine, but at the same time, he loses revenue from the initial eight engines because they are all sold at the lower price. Use the purple rectangle (diamond symbols) to shade the area representing the revenue lost from the initial eight engines by selling at $60,000 rather than $80,000. Then use the green rectangle (triangle symbols) to shade the area representing the revenue gained from selling an additional engine at $60,000. 3. The components of marginal revenue Jabari's HookNLadder…Fill out the entries in the table below. If the price is $12/unit, what is the quantity, total revenue and profits? Assume competitive mkt. Q TC FC VC MR MC 0 8 1 12 2 14 3 20 4 30 5 50Demand for Fries QD(P) = 10,000 - 10P N number of firms follow: TC(Q) = 20,000 +0.5Q^2 What is the market price of Fries long-run?
