EP ECONOMICS,AP EDITION-CONNECT ACCESS
20th Edition
ISBN: 9780021403455
Author: McConnell
Publisher: MCGRAW-HILL HIGHER EDUCATION
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Chapter 10.6, Problem 2QQ
To determine
Changes in output when price changes.
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Students have asked these similar questions
A firm has a price of 18$ per unit for its products while it has a variable cost of VC = q2 + 2q where q is the level of output. In addition the firm has a fixed cost of 20$.
a. Write the profit function
b. Calculate the level of output which will maximize the profit
c. Show that the critical (stationary ) point is a maximum point rather than a minimum.
d. At this output level, what is the total profit?
In a competitive market, the long-run demand is given by
P = 20 - (0.01)*q
Firms in the industry have as their cost structure the expression
C = q3 - 5q2 + 10q.
Determine:
(a) equilibrium price
b) Quantity produced-sold of the firm.
c) What quantity is traded in the market?
d) Over what time period does this market work? (short or long term?)
e) What is the profit of the individual firm?
f) What will be the behavior of the individual firm, will it exit or stay in the market?
Consider a kettle firm A in a perfectly competitive market. Table 1 shows the quantity
produced per hour (Q) and the total cost (TC) in the short run.
Quantity
0
12345C70
2
6
8
Total cost
17
30
40
55
75
100
130
165
210
Fixed cost
17
17
17
17
17
17
17
17
Chapter 10 Solutions
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- Many companies start with cost to determine price since revenue must cover cost for the firm to make a profit. True Falsearrow_forwardA competitive firm has following SHORT RUN cost function: C = 4 + 2q3- 4q2 + 20q Answer:(a) Obtain in a table average total cost (ATC), average variable (AVC) and marginal costs (MC). Plot on a graphb) In what price interval will firm offer zero output? Identify on your graphc) Identify the supply curve in graphd) At what price will firm offer exactly 8 units?arrow_forwardQ1. Given cost function f(x) = 1/2(c)(x2), where c>0, and demand curve y(z) = z-a, where a > 1 a). Compute price elasticity of demand. b). Draw a diagram showing marginal cost and marginal revenue c). Find price and output that maximize profits d). Find the markup (price divided by marginal cost). Does it increase or decrease based on elasticity of demand?arrow_forward
- Discuss the importance of price elasticity of demand, income elasticity of demand and cross price elasticity of demand to a sales manager selling soft drinks like Coca Cola If a firm faces the Marginal Cost schedule MC = 180 + 0.3Q2 and the MR schedule is MR = 540 = 0.6Q2 and that Total Fixed costs are $65. What is the maximum profit it can make? Assume that the second-order condition for maximum is metarrow_forwardAMCO is a firm producing tables in Spain. It has a fixed cost of 100$ and a cost per unit of production of 2$. The demand function for a table is given by: P = 60 - 4Q 1. Find the equations of TR and TC. 2. Write down the equation of the profit. 3. Find Qwhen TR = 0 (x-intercept/roots). 4. Find Qwhen TR is a maximum. 5. Deduce the maximum total revenue (TR max).arrow_forwardWhich one of the following activities would most likely be considered a long-run pricing decision? A. setting prices to generate a reasonable rate of return on investment B. changing prices in response to weak demand C. product mix adjustments in a competitive market D. one-time-only special order pricing that would result in achieving the break-even pointarrow_forward
- A company has determined that the price and the monthly demand of one of its products are related by the following equation: Q = 300 - p. The associated fixed costs are $1,500 per month and the variable costs are $100 per unit. What is the maximum profit? What is the range of profitable demand?arrow_forwardSolve the followingarrow_forwardA firm in a perfectly competitive industry has fixed costs of FC = 3 and average variable costs of AVC = 2 + 8q. a) What are the firm’s variable costs (VC)? b) What is the firm’s total cost function? c) If the price is $18, how much does the firm supply? d) Does the firm continue to supply this quantity in the short run? e) Suppose there exists a standard market demand function from consumers (downward sloping). Please provide logical discussion about how the market achieves short-run equilibrium. f) Suppose the market demand was given by Qd(p) = 50 – p. Suppose further that a sales tax of £1 per unit is imposed in the market. Calculate the deadweight loss resulting from this tax. Assume the market consists of 100 firms with identical cost functions.arrow_forward
- T-Shirt Enterprises is selling in a purely competitive market. It is producing 3,000 units, selling them for $2.00 each. At this level of output, the average total cost is 2.50 and the average variable cost is $2.20. Based on these data, the firm should Multiple Choice shut down in the short run. decrease output to 2,500 units. continue to produce 3,000 units. increase output to 3,500 units.arrow_forwardSuppose that a firm’s fixed costs is $80, and variable costs per unit are $(2Q + 16). The demand function for its product is given as:2Q + P = 54Determine its break-even point (Hint; At Break-even, revenue equal cost)arrow_forwardA firm faces a demand function (where q=quantity demanded and p-price): q= 500- 6p and a total cost (TC) function (where q-output): 128. TC =-q² + 20q+ 375 %3D Find break-even point when TR=TCarrow_forward
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