ECON 2030 Chapter : All Course Material
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(1) | (2) | (3) | (4) | (5) | (6) | (7) |
Output (Q) | Price per Unit (P) | Total Revenue (TR) | Marginal Revenue (MR) | Total Cost (TC) | Average Total Cost (ATC) | Marginal Cost (MC) |
0 | $10 | $8 | ||||
1 | 9 | 11 | ||||
2 | 8 | 12 | ||||
3 | 7 | 15 | ||||
4 | 6 | 24 | ||||
5 | 5 | 35 | ||||
6 | 4 | 48 |
Does this data represent the revenues and costs of a perfect competitive firm or a firm with some degree of âmonopoly powerâ? ______________________
How do you know? ________________________________________________
Fill in the blanks in the table above.
How much output should this firm produce to maximize itâs profit? _____units. What price should this firm charge for its product? $_____ per unit.
This choice of output and price will lead to an economic profit = $______
PROBLEM SET ONE -2 - PRICE-ELASTICITY OF DEMAND
| P1 | P2 | QD1 | QD2 | I | II | III | IV | V |
1 | 1 | 2 | 10 | 5 | |||||
2 | 5 | 3 | 40 | 90 | |||||
3 | 12 | 20 | 200 | 200 | |||||
4 | 3 | 2 | 9 | 9 | |||||
5 | 0.40 | 1.40 | 30 | 15 | |||||
6 | 1.2 | 4.0 | 20 | 15 | |||||
7 | 7.5 | 4.6 | 40 | 30 | |||||
8 | 5 | 5.000â¦01 | 1x106 | 0 | |||||
9 | 5 | 4.9999â¦. | 10 | 1x109 | |||||
10 | 6 | 12 | 12 | 6 | |||||
11 | 18 | 36 | 360 | 180 | |||||
12 | 7 | 15 | 24 | 16 | |||||
13 | 7 | 16 | 78 | 78 | |||||
14 | 25 | 65 | 150 | 100 | |||||
15 | 65 | 91 | 1300 | 780 | |||||
16 | 4 | 5 | 21 | 11 | |||||
17 | 8 | 4 | 30 | 54 | |||||
18 | 140 | 275 | 625 | 495 | |||||
19 | 78 | 91 | 780 | 780 | |||||
20 | 91 | 78 | 780 | 780 |
Column I - determine the Price-Elasticity of Demand Coefficient. Find material in Chapter 6 and the Powerpoint of Elasticity Chap 004 19e.ppt
change in quantity demanded change in price
ED = ---------------------------------------- â ----------------------------
sum of quantities demanded / 2 sum of prices / 2
The data in the first four columns represent price (P) and quantity demanded (Qd) in time 1 (before change in price) and time 2 (after change in price). Note that results should be expressed in absolute terms (see paragraph Elimination of Minus Sign). For example, -1 should be expressed as â1â.
Column II â Based on topic concerning Interpretations of ED, indicate which applies based on how the quantity demanded changed subsequent to a change in price (elastic, inelastic, etc.)
Column III - you need to determine if the good in question would be considered a necessity, a luxury or neither.
Column IV â Indicate, in monetary terms, how much is the change in total revenue or total expenditure (TR = P X QD), from the first price level to the second.
Column V - the direction of the change, also in monetary terms, that is, increasing or decreasing, and by how much? (show a + sign for increasing and a â sign for decreasing).
Note: for any monetary result please include the applicable currency symbol ($, â¬, etc.)
The following table shows the demand curve and cost information for a firm that is monopoly
Price | Quantity | TC |
$10 | 0 | $500 |
$9 | 200 | $1,000 |
$8 | 400 | $1,600 |
$7 | 600 | $2,500 |
$6 | 800 | $4,000 |
What quantity should they produce to maximize their profits?
200 units
400 units
800 units
600 units
Mary competes in a monopolistically competitive market. Suddenly, 5 new firms enter the market causing her perceived demand curve to shift. The following tables show her original and new demand curves and her cost information.
Assume that Mary can only choose from the quantities of output given in the table. By how will the quantity that she produces change after the new firms enter the market?
Original Demand Curve
Price | quantity | TC |
30 | 0 | $130 |
25 | 10 | $140 |
20 | 20 | $260 |
15 | 30 | $450 |
10 | 40 | $660 |
New Demand Curve
25 | 0 | $130 |
20 | 10 | $140 |
15 | 20 | $260 |
10 | 30 | $450 |
5 | 40 | $660 |
Decrease by 5
Decrease by 10
Increase by 10
Increase by 5
Monopolistic competitor has the following information about cost and demand
Quantity | Price($) | Total Revenue ($) | Marginal Revenue ($) | Total Cost ($) | Marginal Cost ($) | Average Cost ($) |
0 | 25 | 0 | 25 | 30 | ---- | ---- |
2 | 24 | 48 | 23 | 35 | 2.5 | 17.5 |
4 | 23 | 92 | 21 | 45 | 5 | 11.25 |
6 | 22 | 132 | 19 | 60 | 7.5 | 10 |
8 | 21 | 168 | 17 | 77 | 8.5 | 9.63 |
10 | 20 | 200 | 15 | 100 | 11.5 | 10 |
12 | 19 | 228 | 13 | 126 | 13 | 10.5 |
14 | 18 | 252 | 11 | 165 | 19.5 | 11.79 |
16 | 17 | 272 | 9 | 210 | 22.5 | 13.13 |
18 | 16 | 288 | 7 | 260 | 25 | 14.44 |
20 | 15 | 300 | 5 | 320 | 30 | 16 |
If this industry was perfectly competitive, what price would the good sell for?
$19
$23
$21
$15
Monopolistic competitor has the following information about cost and demand
Quantity | Price($) | Total Revenue ($) | Marginal Revenue ($) | Total Cost ($) | Marginal Cost ($) | Average Cost ($) |
0 | 25 | 0 | 25 | 30 | ---- | ---- |
2 | 24 | 48 | 23 | 35 | 2.5 | 17.5 |
4 | 23 | 92 | 21 | 45 | 5 | 11.25 |
6 | 22 | 132 | 19 | 60 | 7.5 | 10 |
8 | 21 | 168 | 17 | 77 | 8.5 | 9.63 |
10 | 20 | 200 | 15 | 100 | 11.5 | 10 |
12 | 19 | 228 | 13 | 126 | 13 | 10.5 |
14 | 18 | 252 | 11 | 165 | 19.5 | 11.79 |
16 | 17 | 272 | 9 | 210 | 22.5 | 13.13 |
18 | 16 | 288 | 7 | 260 | 25 | 14.44 |
20 | 15 | 300 | 5 | 320 | 30 | 16 |
What will the firm