ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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- Que 1arrow_forward11. Profit maximization using total cost and total revenue curves Suppose Hubert runs a small business that manufactures teddy bears. Assume that the market for teddy bears is a competitive market, and the market price is $20 per teddy bear. The following graph shows Hubert's total cost curve. Use the blue points (circle symbol) to plot total revenue and the green points (triangle symbol) to plot profit for teddy bears quantities zero through seven (inclusive) that Hubert produces. 200 175 Total Revenue 150 125 Total Cost Profit 100 75 50 25 -25 3 QUANTITY (Teddy bears) 1 2 5 7 8 TOTAL COST AND REVENUE (Dollars)arrow_forward3. Profit maximization using total cost and total revenue curves Suppose Bob runs a small business that manufactures teddy bears. Assume that the market for teddy bears is a competitive market, and the market price is $25 per teddy bear. The following graph shows Bob's total cost curve. Use the blue points (circle symbol) to plot total revenue and the green points (triangle symbol) to plot profit for teddy bears quantities zero through seven (inclusive) that Bob produces. TOTAL COST AND REVENUE (Dollars) 200 175 150 125 100 75 50 25 0 -25 O ☐ ☐ 0 1 2 3 4 5 QUANTITY (Teddy bears) ☐ 6 Total Cost 7 8 O Total Revenue Profit ?arrow_forward
- Suppose Rina runs a small business that manufactures frying pans. Assume that the market for frying pans is a competitive market, and the market price is $20 per frying pan. The following graph shows Rina's total cost curve. On the graph below, use the blue points (circle symbol) to plot total revenue and the green points (triangle symbol) to plot profit for the first seven frying pans that Rina produces, including zero frying pans. TOTAL COST AND REVENUE (Dollars) 200 175 150 125 100 75 50 25 0 -25 □ 0 1 U 2 ■ U 3 4 5 QUANTITY (Frying pans) n 6 Total Cost 7 8 Total Revenue Profit ?arrow_forward113. Subject :- Economyarrow_forwardSuppose 2 gas stations must post their prices for regular gasoline at 6am each morning and cannot change their price during the day. Each gas station has a choice: charge a relatively “low” price or charge a relatively “high” price. The following shows their profit for the day of each gas station depending upon which price each gas station chooses: Gas Station B Low Price High Price Gas Station A Low Price $2000, $900 $500, $1500 High Price $1200, $1800 $300, $2100 Assume that this is a "one shot" game: 4. Does this game represent a prisoner’s dilemma situation? Why or why not? 5. If the gas stations can talk the night before making their pricing decision and discuss their pricing strategies, what pricing strategy would each gas station choose the next morning? Assuming both gas stations act rationally, what will be the outcome of the game? Explain.arrow_forward
- What is an example of another business that stays open even when it's slow, and its revenue does not seem like it could cover its costs? Use microeconomics terms to explainarrow_forwardHayfever Farms is an 80-acre hay farm in Colorado. The owners are considering changing the farm's name to Blissful Acres and growing strawberries instead of hay. Use the table of marginal cost (MC) and marginal revenue (MR) to answer two questions. Number of acres MC $ MR $ (hay) MR $ (strawberries) 10 320 730 5600 20 200 730 5600 30 540 730 5600 40 730 730 5600 50 1200 730 5600 60 3200 730 5600 70 5600 730 5600 80 6700 730 5600 If they continue to only grow hay, how many acres should Hayfever Farms devote to growing hay in order to maximize profits? acres of hay: acres If the owners decide to only grow strawberries, how many acres should Blissful Acres devote to growing strawberries in order to maximize profits? acres of strawberries:arrow_forwardSuppose Megan runs a small business that manufactures teddy bears. Assume that the market for teddy bears is a competitive market, and the market price is $25 per teddy bear. The following graph shows Megan's total cost curve. Use the blue points (circle symbol) to plot total revenue and the green points (triangle symbol) to plot profit for the first seven teddy bears that Megan produces, including zero teddy bears. 200 T 175 150 125 100 75 50 0 -25 35 30 20 15 10 5 0 0 D 0 1 2 1 C 2 D ☐ 3 4 5 QUANTITY (Teddy bears) Calculate Megan's marginal revenue and marginal cost for the first seven teddy bears she produces, and plot them on the following graph. Use the blue points (circle symbol) to plot marginal revenue and the orange points (square symbol) to plot marginal cost. (?) 0 3 4 5 QUANTITY (Teddy bears) 6 Total Cost 0 6 7 8 7 O 8 Total Revenue A Profit O (?) Marginal Revenue Marginal Cost Megan's profit is maximized when she produces teddy bears. When she does this, the marginal cost…arrow_forward
- Suppose 2 gas stations must post their prices for regular gasoline at 6am each morning and cannot change their price during the day. Each gas station has a choice: charge a relatively “low” price or charge a relatively “high” price. The following shows their profit for the day of each gas station depending upon which price each gas station chooses: Gas Station B Low Price High Price Gas Station A Low Price $2000, $900 $500, $1500 High Price $1200, $1800 $300, $2100 Assume that this is a "one shot" game: Which strategy should Gas Station A choose? Is it a dominant strategy? Explain why or why not. Which strategy should Gas Station B choose? Is it a dominant strategy? Explain why or why not What is the outcome for each Gas Station? How much profits will each Gas Station earn? Explain. Does this game represent a prisoner’s dilemma situation? Why or why not? If the gas stations can talk the night before making their pricing decision and discuss their pricing…arrow_forwardSuppose Eileen runs a small business that manufactures shirts. Assume that the market for shirts is a competitive market, and the market price is $20 per shirt. The following graph shows Eileen's total cost curve. Use the blue points (circle symbol) to plot total revenue and the green points (triangle symbol) to plot profit for shirts quantities zero through seven (inclusive) that Eileen produces. 200 175 Total Revenue 150 125 Total Cost Profit 100 50 25 -25 1 3 4 6 7 QUANTITY (Shirts) Calculate Eileen's marginal revenue and marginal cost for the first seven shirts she produces, and plot them on the following graph. Use the blue points (circle symbol) to plot marginal revenue and the orange points (square symbol) to plot marginal cost at each quantity. (?) 40 Marginal Revenue Marginal Cost 1. 5 6 7 8 QUANTITY (Shirts) Eileen's profit is maximized when she produces shirts. When she does this, the marginal cost of the last shirt she produces is $ which is v than the price Eileen receives…arrow_forward
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