12. Consider a duopoly market. Two firms are selling identical products and all costs are assumed to be zero for simplicity. Market demand schedule is given in the following table. Note that firms always choose an integer value for the quantity of production. Quantity Price Total Profit 3 $12 4 11 5 8 6 6. 7 4 8 2 1 10 a. Fill in the column of total profit.

12. Consider a duopoly market. Two firms are selling identical products and all costs are assumed to be zero for simplicity. Market demand schedule is given in the following table. Note that firms always choose an integer value for the quantity of production. Quantity Price Total Profit 3 $12 4 11 5 8 6 6. 7 4 8 2 1 10 a. Fill in the column of total profit.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Austin is a dot-com entrepreneur who has established a Web site at which people can design and buy awatch. Austin pays $900 a month for a Web server and Internet connection. The watches that customers design are made to order by another firm, and Austin pays this firm $120 a watch. Austin has no other costs. The table shows the demand schedule for Austin's watches. Austin is making an economic profit. In the long run, the demand for Austin's watches OA. decreases; incurs an economic loss OB. increases; makes zero economic profit C. increases, increases his economic profit D. decreases; makes zero economic profit OE. decreases; shuts down and in long-run equilibrium, Austin MIER Price (dollars per watch) 200 160 120 80 40 0 Quantity (watches per month) 0 40 80 120 160 200
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…
11. Problems and Applications Q11 Kevin, Rajiv, and Yakov run the only saloon in town. • Kevin wants the saloon to bring in as much revenue as possible. Rajiv wants to make the largest possible profit. • Yakov wants to sell as many drinks as possible without losing money. Use the black point (plus symbol) to show the price and quantity combination favored by Kevin. Then use the grey point (star symbol) to show the price and quantity combination favored by Rajiv. Finally, use the purple point (diamond symbol) to show the price and quantity combination favored by Yakov. Demand ATC MO MR Quantity Kevin Rajiv Yakov G
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3. Johnny Rockabilly has just finished recording his latest CD. His record company's marketing department determines that the demand for the CD is as follows: Price Number of CDs $24 10 000 22 20 000 20 20 30 000 18 40 000 16 50 000 14 60 000 The company can produce the CD with no fixed cost and a variable cost of $5 per CD. a. Find total revenue for quantity equal to 10 000, 20 000, and so on. What is the marginal revenue for each 10 000 increase in the quantity sold? b. What quantity of CDs would maximize profit? What would be the price? What would be the profit? c. If you were Johnny's agent, what recording fee would you advise Johnny to demand from the record company? Why?
Σ B. 20 10 50 30 20 PRICE (Dollars per bat) Homework (C (91. 4. Is monopolistic competition efficient? Suppose that a firm produces baseball bats in a monopolistically competitive market. The following graph shows its demand curve, marginal revenue (MR) curve, marginal cost (MC) curve, and average total cost (ATC) curve. Place a black point (plus symbol) on the graph to indicate the long-run monopolistically competitive equilibrium price and quantity for this firm. Next, place a grey point (star symbol) to indicate the minimum average total cost the firm faces and the quantity associated with that cost. 06 Mon Comp Outcome Min Unit CAst 09 40 10 MR Demand pleuwe 09 06 QUANTITY (Thousands of bats) Because this market is a monopolistically competitive market, you can tell that it is in long-run equilibrium by the fact that ▼ at the optimal eticall the miair MacBook Pro ACID & 5. R H N command comm
As a result of the 1. ___ economic profit, some firms will 2. ___ the mountain bike industry. Suppose Mickey's Mountain Bikes remains in business. The demand for Mickey's Mountain Bikes 3.___ and the price of Mickey's Mountain Bikes 4.___. The market share for firms in the mountain bike industry 5.___ as the market adjusts to the long run equilibrium.
The market for Banh Mi in Auckland CBD consists of 6 restaurants operating in monopolistic competition. Suppose that these firms face monthly fixed costs of $5,000 and marginal costs of $3. a) Draw the average cost and marginal cost curves for a representative firm. b) If the short run market price is $6 and each firm sells 2000 units per month, what will occur in the long run? Explain and show on a graph. c) Suppose that Banh Mi become more popular as a lunch option, and market demand increases. Explain the short run and long run effects on the market, including price, firm-level quantity and number of firms. Use graphs to explain your answer.
4. Pat's Hair Designs is part of a monopolistically competitive haircut market in Berkeley. (a) At present, Pat is earning positive profits by running the haircut business. Draw a diagram illustrating Pat's profit-maximizing price and quantity of haircuts. Explain what your diagram shows, including a descritpion of what each line in your diagram represents. (b) Is the haircut market in Berkeley in long-run equilibrium? If it is, explain why. If it is not, draw a diagram illustrating Pat's profit-maximizing price and quantity of haircut in the long-run equilibrium (Assume Pat's remains in the market). Explain how the market moves from the equilibrium you drew in (a) to the one here. (In other words, explain which curves move and why.)
3. The components of marginal revenue Lorenzo's Fire Engines is the sole seller of fire engines in the fictional country of Pyrotania. Initially, Lorenzo produced five fire engines, but he is considering increasing production to six fire engines. The following graph shows the demand curve Lorenzo faces. As you can see, to sell the additional engine, Lorenzo must lower his price from $105,000 to $90,000 per fire engine. Note that although Lorenzo would gain revenue from the additional engine he sells, he would also lose revenue from the initial five engines because he would have to sell them all at the lower price. Use the purple rectangle (diamond symbols) to shade the area representing the revenue lost from the initial five engines by selling at $90,000 rather than $105,000. Then use the green rectangle (triangle symbols) to shade the area representing the revenue gained from selling an additional engine at $90,000. PRICE (Thousands of dollars per fire engine) 150 135 120 105 90 75 60…
Chapter 16 Homework PRICE (Thousands of dollars per fire engine) 220 Femi 200 180 160 140 120 100 80 60 40 20 0 0 True 1 False 2 4 56 7 QUANTITY (Fire engines) 3 8 Demand 9 10 increase production from 8 to 9 fire engines because the True or False: If alternatively Femi's HookNLadder were a competitive firm and $80,000 were the market price for an engine, decreasing its price from $80,000 to $40,000 would result in the same change in the production quantity and, thus, total revenue. Revenue Lost Revenue Gained dominates in this scenario.