EBK INTERMEDIATE MICROECONOMICS AND ITS
12th Edition
ISBN: 9781305176386
Author: Snyder
Publisher: YUZU
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Chapter 14, Problem 8RQ
To determine
To explain:
Reason for considering all costs in profit maximizing condition.
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A monopoly sells 30 units of output when price Ksh 12 and 40 units when price is Ksh 10. If its demand schedule is linear, what is the specific form of the actual demand function? Use this function to predict quantity sold when price is Ksh 8. What domain restrictions would you put on this demand function?
Suppose the government regulates the price of a good to be no lower
than some minimum level. Moreover, suppose firms misinterpret the
regulated price as a signal to produce more output.
Using the graph to the right, compute this fictional industry's net gain or
loss resulting from this policy.
As a whole, firms in this industry will experience a net
of $
P = $6.50
because of this policy. (Enter your response rounded t
whole number.)
5.00
3.50
gain
loss
D
120
180
Quantity
Price ($)
At these levels of output the marginal revenue in the manufactured items market is
and the marginal revenue in the semimanufactured raw materials market is
.
At these prices, the price elasticity of demand in the manufactured items market is and the the price elasticity of demand in the semimanufactured raw materials market is . (Hint: ED=PMR−P��=�MR−�)
What are the total profits if the company is effectively able to charge different prices in the two markets?
.
If the company is required by law to charge the same per-ton rate to all users, the new profit-maximizing level of price and output are
per ton and
tons respectively. The total profits in this situation is
.
Chapter 14 Solutions
EBK INTERMEDIATE MICROECONOMICS AND ITS
Ch. 14.3 - Prob. 1MQCh. 14.3 - Prob. 2MQCh. 14.4 - Prob. 1MQCh. 14.4 - Prob. 1TTACh. 14.4 - Prob. 2TTACh. 14.5 - Prob. 1TTACh. 14.5 - Prob. 2TTACh. 14.5 - Prob. 1MQCh. 14.6 - Prob. 1TTACh. 14.6 - Prob. 2TTA
Ch. 14.6 - Prob. 1MQCh. 14.6 - Prob. 2MQCh. 14.6 - Prob. 1.1TTACh. 14.6 - Prob. 2.1TTACh. 14 - Prob. 1RQCh. 14 - Prob. 2RQCh. 14 - Prob. 3RQCh. 14 - Prob. 4RQCh. 14 - Prob. 5RQCh. 14 - Prob. 6RQCh. 14 - Prob. 7RQCh. 14 - Prob. 8RQCh. 14 - Prob. 9RQCh. 14 - Prob. 10RQCh. 14 - Prob. 14.1PCh. 14 - Prob. 14.2PCh. 14 - Prob. 14.3PCh. 14 - Prob. 14.4PCh. 14 - Prob. 14.5PCh. 14 - Prob. 14.6PCh. 14 - Prob. 14.7PCh. 14 - Prob. 14.8PCh. 14 - Prob. 14.9PCh. 14 - Prob. 14.10P
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- Suppose the government regulates the price of a good to be no lower than some minimum level. Moreover, suppose firms misinterpret the regulated price as a signal to produce more output. Using the graph to the right, compute this fictional industry's net gain or loss resulting from this policy. Price ($) As a whole, firms in this industry will experience a net of $ because of this policy. (Enter your response rour nearest whole number.) loss 4.50 3.50 gain Q ☑ S Ps = $5.50 D :100 140 180 Quantityarrow_forwardConsider a market with a monopoly firm. Sales revenue of this firm is $15,960,000 total cost is $8,680,000 and average cost is $3.10 Another firm wants to enter the market and provide the same product at a lower price. To intimidate the potential competitor, the monopoly firm intends to use predatory pricing.By how much can this firm reduce the price of its product without losses? Enter your answer in the box below and round to two decimal places if necessary.arrow_forwardMost public utilities (gas, electricity, water, and local telephone companies, for instance) are subject to rate of return regulation, under which a firm is allowed to choose its price, subject to its proving that it is not earning too much money. Typically, the firm is allowed to cover its expenditures for labor and material exactly and to earn a "fair" rate of return on its capital investment. Can you think of any problems with this sort of regulatory scheme? In particular, what do you think that this plan does to the firm's incentives to substitute capital for labor?arrow_forward
- Round off your final answer to whole #. A company produces and sells a consumer product and is able to control the demand by varying the selling price. The approximate relationship between price and demand is 2700 5,000 p=47 + -forD>1 D D² The company is seeking to maximize its profit. The fixed cost is $1,000 and the variable cost is $39 per unit. What is the number of units that should be produced and sold each month to maximize profit?arrow_forwardYou are the manager of a firm that produces output in two plants. The demand for your firm's product is P= 26 2Q, where Q=Q1+Q₂2. The total costs associated with producing in the two plants are Ci(Q₁)=5+1.5Q and C₂ (22) = 10 +22 How much output should be produced in plants 1 and 2 in order to maximize profits? Q₁ 22 What is the monopoly price?$ What are their maximum profits using both plants? $ Suppose the firm has already built plant 1 and the fixed cost of production is sunk. But, plant 2 has not yet been built yet, the fixed cost of production are not sunk. If they use only plant 1, what is their maximum profit? $ Should the firm build the second plant?arrow_forwardA manufacturer knows that: His TR is given by Revenue = 23Q – Q2 /4 His total cost of production is; Cost = 36 + 2Q + 0.1Q2 Where Q is the weekly production in thousands a) Economists define MR as the rate of change of Total revenue. Derive an expression for Marginal Revenue (MR) b) How do you think Economists’ would define ‘Marginal Cost’? Derive an expression for marginal Cost (MC) and at what output will make marginal Revenue equal Marginal cost? c) Find the total profit and the value of Q that maximizes profitarrow_forward
- Refer to Exhibit 22-2. If the firm produces the quantity of output at which marginal revenue (MR) equals marginal cost (MC), is it guaranteed maximum profit or minimized loss? Group of answer choices Yes, when MR = MC, it follows that MR - MC = 0, and thus the firm maximizes profit and minimizes losses. No, at the quantity of output at which MR = MC, it could be the case that average variable cost is greater than price and the firm would do better to shut down. Yes, when the firm produces the quantity at which MR = MC, it has maximized both revenue and profit. Yes, because if the MC curve is rising, the average total cost curve always lies below it and thus profit is earned.arrow_forwardSuppose that a firm has estimated its demand curve as q = 36,233 - 96*P, where P is the price per unit and q is the quantity of units produced. What is the firm's marginal revenue equal to when it produces 2,513 units? Please round to two decimal places. (Hint: this is the demand, not the inverse demand!) Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism.Answer completely.You will get up vote for sure.arrow_forwardSuppose that a local electrical utility firm was split into five firms of equal size. What do you expect about electricity prices?arrow_forward
- 19.5 (0) A profit-maximizing firm produces one output, y, and uses one input, r, to produce it. The price per unit of the factor is denoted by w and the price of the output is denoted by p. You observe the firm's behavior over three periods and find the following: Period 1 1 1 1 1 2.5 .5 3 4 .25 (a) Write an equation that gives the firm's profits, n, as a function of the amount of input z it uses, the amount of output y it produces, the per-unit cost of the input w, and the price of output p. (b) In the diagram below, draw an isoprofit line for each of the three periods, showing combinations of input and output that would yield the same profits that period as the combination actually chosen. What are the equations for these three lines?. the theory of revealed profitability, shade in the region on the graph that represents input-output combinations that could be feasible as far as one can tell from the evidence that is available. How would you describe this Using region in words?…arrow_forwardWhich returns to scale will an efficient firm choose? What market structure has no loss in long run? What production function shows the maximum quantity of goods or services that can be produced with a set of inputs assuming one of the inputs used remains unchanged? Capacity planning refers to adjustment in production considering the what? What can destroy monopoly position?arrow_forwardA monopoly profit-maximizes by selling 700 tables each hour. At this level of production, it has marginal revenue of $40, average revenue of $50, marginal cost of $40 and average total cost of $42. What is the monopoly's profit-maximizing price assuming they are not price discriminating? Type your numeric answer and submitarrow_forward
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