Question 1: Why are costs so important for a perfectly competitive firm? Question 2: Suppose you...

Question 1: Why are costs so important for a perfectly competitive firm?

Question 2: Suppose you own and manage a hotel that has 100 rooms. Your total costs (including all staff wages, utilities, insurance, lease payments, etc.) are $10,000/night, such that your average total costs per room are $100 per night. You work with an online bidding Web site (like Priceline) and receive a bid of $70 for a single night in the following week. You currently have several vacant rooms available on this night. Should you accept this bid? Briefly explain on what factors this decision would depend.

Expert Solution

Rahul Sunny answered 2 years ago

Question 2. Suppose you are a consultant for a firm that is perfectly competitive. The firm...

Question 2. Suppose you are a consultant for a firm that is perfectly competitive. The firm is worried only about its policies in the short run. What would you recommend in terms of quantity changes (raise, cut, shut down or stay put) and price changes (raise, cut, stay put) in each of the following situations: a. [15 points] P $19 MC $14 AVC $20 b. [15 points] P S11MC S106 AVC $107 Notations/Abbreviations: P- price; MC-marginal cost; AVC- average variable...

Suppose that you manage a firm in a perfectly competitive market that has the following costs...

Suppose that you manage a firm in a perfectly competitive market that has the following costs of production: Quantity Total Cost 0 $5 1 $8 2 $10 3 $13 4 $18 5 $24 6 $32 7 $42 8 $53 9 $66 10 $81 If the market price is $6, how many units should you produce to maximize profit?

Consider a perfectly competitive firm with total costs ?? = ? + ?? + ??2 a)...

Consider a perfectly competitive firm with total costs ?? = ? + ?? + ??2 a) Identify the fixed cost ??, and the variable cost of this firm, ??(?). (Each of them is just a part of the total cost.) b) Find the average cost ??(?), and the marginal cost ??(?). c) Long-run supply. Find the minimum of the ??(?) curve, which constitutes the “shut- down price” in a long-run setting. Use this “shut-down price” to describe the firm’s long-run...

Consider a perfectly competitive firm with total costs ?? = ? + ?? + ?? 2...

Consider a perfectly competitive firm with total costs ?? = ? + ?? + ?? 2 a) Identify the fixed cost ??, and the variable cost of this firm, ??(?). (Each of them is just a part of the total cost.) b) Find the average cost ??(?), and the marginal cost ??(?). c) Long-run supply. Find the minimum of the ??(?) curve, which constitutes the “shutdown price” in a long-run setting. Use this “shut-down price” to describe the firm’s long-run...

Consider a perfectly competitive firm with total costs ?? = ? + ?? + ?? ^2...

Consider a perfectly competitive firm with total costs ?? = ? + ?? + ?? ^2 a) Identify the fixed cost ??, and the variable cost of this firm, ??(?). (Each of them is just a part of the total cost.) b) Find the average cost ??(?), and the marginal cost ??(?). c) Long-run supply. Find the minimum of the ??(?) curve, which constitutes the “shutdown price” in a long-run setting. Use this “shut-down price” to describe the firm’s long-run...

Question 1: There are many sellers in a perfectly competitive market. So many that A. there...

Question 1: There are many sellers in a perfectly competitive market. So many that A. there is tremendous rivalry between firms. B. if any one of them produced more or less, there would be a change in market price. C. one producer may have a large market share. D. each one is a price taker. Question 2: In a perfectly competitive market, A. there are many buyers and many sellers. B. the goods for sale from one producer are perfect...

1. Complete the table given showing the costs of a perfectly competitive firm.

1. Complete the table given showing the costs of a perfectly competitive firm.OutputTotal CostTotal Fixed CostTotal Variable CostAverage Fixed CostAverage Variable CostAverage Total CostMarginal cost1003601602000.33000.834001.3050046060037001.680022402. If the market price is Rs 3,what will be the profit/ loss of the firm?

Suppose that you are a manager of a firm like Sproule Farms, a perfectly competitive grower...

Suppose that you are a manager of a firm like Sproule Farms, a perfectly competitive grower of sugar beets. The market price of sugar beets is $50 per ton. The table below has your cost per ton. Quantity (Tons) Total Cost $ 5000 235,510 5001 235,550 5002 235,600 5003 235,651 5004 235,703 5005 235,756 The profit-maximizing quantity of sugar beets is ______ tons. At the profit-maximizing quantity your economic profit or loss is $ _______.

Question 1. We assume that a firm is in a perfectly competitive industry. The relations between...

Question 1. We assume that a firm is in a perfectly competitive industry. The relations between the firm’s total cost (T C), marginal cost (MC) and quantity produced (Q) are given by: T C=$1,000,000+$20Q+$0.0001Q2 MC= ∂T C ∂Q =$20+$0.0002Q Total cost includes a normal profit. (1). What are the levels of optimal output and profit if price is equal to $60 each? (5 points) (2). If the total fixed cost is $1,000,000, check that the firm’s marginal cost is greater...

a) Explain why the demand curve facing a perfectly competitive firm is assumed to be perfectly...

a) Explain why the demand curve facing a perfectly competitive firm is assumed to be perfectly elastic (i.e., horizontal at the going market price). b) The manufacturer of high-quality flatbed scanners is trying to decide what price to set for its product. The costs of production and the demand for the product are assumed to be as follows: TC = 500,000 + 0.85Q + 0.015Q 2 Q = 14,166 - 16.6P Determine the short-run profit-maximizing price. c) Explain why the...

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