Suppose a pharmaceutical firm just invents a new drug to treat mad cow disease and this is the only effective drug available in the market. The demand and total cost functions of the firm are: Demand: P = 36 – Q Total cost: C = 24 + 2Q2 where P is the price of the drug,Q is the quantity of the drug and C is the total cost of the firm.   Draw a diagram to show the price, output and profit of the firm. Label your diagram clearly.  Suppose the pharmaceutical firm needs to spend a lump sum of $M to apply for the patent of the drug. Explain whether this cost of patent affects the price, output and profit of the firm.

Consider the perfectly competitive market for dress shirts. The following graph shows the marginal cost (MC), average total cost (ATC), and average variable cost (AVC) curves for a typical firm in the industry. PRICE AND COST PER UNIT (Dollars) 100 90 80 70 60 40 30 20 10 0 0 ☐ ☐ MC ■ ATC AVC 70, 85 ■ 10 20 30 40 50 60 70 80 90 QUANTITY OF OUTPUT (Thousands of shirts) 100 ?

Henry Potter owns the only well in town that produces clean drinking water. He faces the following demand, marginal revenue, and marginal cost curves: Demand: P=60−QP=60−Q Marginal Revenue: MR=60−2QMR=60−2Q Marginal Cost: MC=QMC=Q   On the following graph, use the blue line (circle symbol) to graph Mr. Potter's demand curve. Then, use the black line (cross symbol) to graph his marginal revenue (MR) curve. Next, use the orange line (square symbol) to graph his marginal cost (MC) curve. Finally, use the grey point (star symbol) to indicate the profit-maximizing price and quantity. :     The profit-maximizing quantity is___units, and the profit-maximizing price is___.   Mayor George Bailey, concerned about water consumers, is considering a price ceiling that is 10% below the monopoly price. At this new price, the quantity demanded would be___units.   At this quantity, the marginal cost would be___the price. Therefore, the profit-maximizing Mr. Potter___produce…

Determine the profit-maximizing quantity, the profit-maximizing price and the profit of the firm given the following inverse demand function: P=400-5Q and the marginal cost of 140.

The following graph illustrates the demand and marginal revenue curve (D=MR) of a perfectly competitive firm. Suppose that when the firm produces 70 units, its average variable cost equals $30 per unit and its average total cost equals $55 per unit. Use the green rectangle (triangle symbols) to plot the total cost of producing 70 units. Next, use the grey rectangle (star symbols) to plot the total variable cost of producing 70 units. Then, use the tan rectangle (dash symbols) to plot the total revenue at 70 units. Finally, use the purple rectangle (diamond symbols) to plot the profit or loss at 70 units. PRICE AND COST (Dollars) 100 90 80 70 60 50 40 30 20 10 0 O 10 20 30 40 50 60 QUANTITY (Units) +ATC + AVC 70 D=MR 80 90 100 Total Cost Total Variable Cost Total Revenue Profit or Loss ?

What is the firm’s shutdown price?

Consider the market for tilapia. Ripple Rock Fish Farms, a small family fishery in Ohio, and The Fishin’ Company, a large corporate supplier, are both producers of tilapia. The marginal cost curves for both firms are shown in the accompanying graph. a. Suppose the market price of tilapia is $2.50 per pound. Move point A to Ripple Rock’s quantity sold. Move point B to The Fishin’ Company’s quantity sold. b. How many pounds of tilapia do they collectively supply?________thousand pounds   c. To achieve efficient production, The Fishin’ Company should supply _____ ("more", or "less", or "the same")  it is currently producing, and Ripple Rock should supply __________ ("more", or "less", or "the same")  it is currently producing.

Pierce Manufacturing determines that the daily revenue, in dollars, from the sale of x lawn chairs is R(x)=0.005x³ +0.02x² +0.5x Currently, Pierce sells 90 lawn chairs daily a) What is the current daily revenue? b) How much would revenue increase if 95 lawn chairs were sold each day? c) What is the marginal revenue when 90 lawn chairs are sold daily? d) Use the answer from part (c) to estimate R(91), R(92), and R(93) a) The current revenue is $ b) The revenue would increase by $ (Round to the nearest cent.) c) The marginal revenue is $ when 90 lawn chairs are sold daily. d) R(91) $ R(92) $ R(93) $

A firm operates two plants.  The total cost schedules for the respective plants are TC1 = 5*Q1 + .1*Q12 and TC2= 2*Q2 + .1*Q22.  The firm’s demand schedule is Q = 160 – 10*P. What is the profit maximizing output for the firm?

7. Short-run supply and long-run equilibrium Consider the competitive market for rhenium. Assume that no matter how many firms operate in the industry, every firm is identical and faces the same marginal cost (MC), average total cost (ATC), and average variable cost (AVC) curves plotted in the following graph. COSTS (Dollars per pound) 100 90 80 70 60 40 20 10 + 0 + 0 MC + 5 ATC AVC D 0 10 15 20 25 30 35 QUANTITY (Thousands of pounds) 40 + 45 50 ?