Marginal cost

The price of cheese and milk in the market are $2 and $5 respectively.  Assume that the cheese and milk markets are perfectly competitive. What output of milk maximizes profits? a)  1.25. b)  12.5. c)  15. d)  20. Marginal cost of producing milk = 0.2*2*M Marginal revenue from Milk = $5 For maximum profit equate the two we have M = 5/0.4=12.5 12.An unregulated industry has a Lerner index of zero.  These numbers: a)  reveal that social welfare would be improved by regulating the firms

barriers to entry that have thus far prevented the industry from effectively allocating its resources to benefit both producer and consumer. The advantages of allowing free competition, as evident in several global cities, are numerous and include cost savings, price reduction, product differentiation and improvement in quality of service. Being one of the state’s most important public service industries and a key segment of its public transport system, the New South Wales taxi industry provides

regulated, the price will be set at P2. It is the point where marginal cost equals marginal revenue and the resulting optimum quantity is replaced into the demand function. b) The price will be P4. This is the point where the marginal cost equals the average revenue, which in a perfectly competitive industry is also the marginal revenue of the firm. c) The minimum feasible price is P3. The firm will not produce below its average total cost. Question 2 a) A perspective. Body Shop was founded with

What happens when Chinese consumers lose confidence in the ability of domestic producers to bring safe and quality products to market, especially when said products aim to fulfill an essential human need – the safe nurturing of infants? The wake of the Chinese baby formula scandal has not subsided, with Chinese consumers rejecting domestic outputs with preference for northern produced goods (Nguyen, Chi-Chur Choa & Hwang, 2016, 1). Compounding Chinese consumer sentiment, recent trends in market liberalization

Profit maximization is concerned with the marginal revenue equaling marginal costs. I believe that in a lot of ways price discrimination does seek to embody the concepts of price maximization. Since different consumers do have varying degrees of demand, price discrimination seeks to charge the maximum that each person willing to pay. This strategy is often referred to as optimal pricing. When price discrimination is used, the airline will inevitable get some people to pay above the equilibrium price

produce in the short run? In the first graph, the firm is losing money, but it should not shut down because P > AVC. So the loss minimizing choice is to stay in business in the short run. To shut down would lead to higher losses equal to fixed costs and these losses would be more than the current losses. In the second graph, the firm is realizing a profit because P > ATC. Consequently, it should continue to operate as long as P > AVC. In the third graph, the firm should shut down because

People tend to focus on the flaws when it comes to humanity’s ability to provide goods and services. News stories on income inequality, lack of adequate healthcare services for hundreds of millions of people, the large number of people who go hungry every day, etc. often capture the attention of humanity better than any other type of story. Combine this with an increasing population, the doomsay predictions about global warming, and the recent economic recession, and it appears that solutions to

products will not cause any increase in product cost. At the same time, a certain public goods do not have exclusive, that is, some people can not be ruled out "non-payment of it to spend money", then known as the pure public goods. Public goods are non-competitive, and they can be consumed by many people, and a marginal cost for increase in consumer spending is zero. Consumers get some effectiveness from public goods, and its consumption of the marginal cost for a certain degree of effectiveness is

Chapter 15 – Mankiw SOLUTIONS TO TEXT PROBLEMS: Quick Quizzes 1. A market might have a monopoly because: (1) a key resource is owned by a single firm; (2) the government gives a single firm the exclusive right to produce some good; or (3) the costs of production make a single producer more efficient than a large number of producers. Examples of monopolies include: (1) the water producer in a small town, who owns a key resource, the one well in town; (2) a pharmaceutical company that is given a patent

function for a product sold by an oligopolist is given below: QD = 370 – P The firm’s marginal cost function is given below: MC = 10 + 4Q Calculate the equilibrium price and quantity. Solution: P = 370 – Q so TR = 370Q – Q2 and MR = 370 – 2Q MR = 370 – 2Q = 10 + 4Q = MC so Q = 60 and P = 310 2. The demand function for a product sold by an oligopolist is given below: QD = 135 – 0.5P The firm’s marginal cost function is given below: MC = 30 + 4Q Calculate the equilibrium price and quantity