Microeconomics (2nd Edition) (Pearson Series in Economics)
2nd Edition
ISBN: 9780134492049
Author: Daron Acemoglu, David Laibson, John List
Publisher: PEARSON
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Chapter 14, Problem 11P
To determine
HH-Index for the industry.
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The blue curve on the following graph represents the demand curve facing a firm that can set its own prices.
Use the graph input tool to help you answer the following questions. You will not be scored on any changes you make to this graph.
Note: Once you enter a value in a white field, the graph and any corresponding amounts in each grey field will change accordingly.
PRICE (Dollars per unit)
100
TOTAL REVENUE (Dollars)
90
80
20
10
0
1250
1125
1000
875
750
625
500
On the previous graph, change the number found in the Quantity Demanded field to determine the prices that correspond to the production of 0, 10,
20, 25, 30, 40, or 50 units of output. Calculate the total revenue for each of these production levels. Then, on the following graph, use the green
points (triangle symbol) to plot the results.
375
250
125 +
0
0
0
Demand
5 10 15 20 25 30 35 40 45 50
QUANTITY (Units)
+
5
20
10 15
25 30 35
QUANTITY (Number of units)
40
Graph Input Tool
Market for Goods
45 50
Quantity
Demanded
(Units)…
You are the manager of a firm that produces and markets a generic type of soft drink in a
competitive market. In addition to the large number of generic products in your markets,
you also compete against major brands such as Coca-Cola and Pepsi. Suppose that, due to
the successful lobbying efforts of sugar producers in Ghana, government is going to levy a
$0.50 per pound tariff on all imported raw sugar – the primary input for your product.
a. How will this event impact on the equilibrium price and quantity of soft drinks? Explain
(Supplement your answer with illustrations)
b. In addition, suppose that Coke and Pepsi plan to launch an aggressive advertising campaign
designed to persuade consumers that their branded products are superior to generic soft
drinks. How will this event impact on the equilibrium price and quantity of soft drinks?
Using the graph answer the following questions:
A: At the profit maximizing level of output, what is the firm's total revenue?
B: At the profit maximizing quantity, what is the firm's total cost?
C: At the profit maximizing quantity, what is the firm's profit?
D: Assuming that most firms in the industry have similar costs, describe what happens in this market to bring the industry to a long-run equilibrium (where there are zero profits).
Chapter 14 Solutions
Microeconomics (2nd Edition) (Pearson Series in Economics)
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