Question
In: Economics
Suppose a firm in a perfectly compectitive market faces following cost functions: AVC = 8000/Q+70 +.25...
Suppose a firm in a perfectly compectitive market faces following cost functions:
AVC = 8000/Q+70 +.25 Q
TC = 8000+70 Q +.25 Q2
The firm faces a market price if Rs 295 with this information calculate the following.
a. Firm's profit maximizing output level?
b. Will firm operate in short run or will shut down temporarily?
c. In real-world situations,monopoiles do face losses or below normal profits. Identify one such real world example of companies/firms and state the reason for below normal profit for each case?
Solutions
Expert Solution
Govt is facing loss in electricity distribution because of high cost incurred and less revenue.
Sometimes due to political reasons govt provides free electricity or exempt payment of bill which will also cause loss.
Rahul Sunny answered 2 years agoRelated Solutions
Assume a firm faces the following demand and cost functions: Demand is: Q = 2600 –...
Assume a firm faces the following demand and cost functions:
Demand is: Q = 2600 – 100P + 0.2M – 500Pr ; AVC = 20 – 0.07Q +
0.0001Q^2; M = $20,000; Pr = $2; Should the firm shut down in the
short-run? What are the expected profits if fixed costs are
$22,500?
Assume the cost data is for a perfectly competitive firm: Q AFC AVC ATC MC 1...
Assume the cost data is for a perfectly competitive
firm:
Q
AFC
AVC
ATC
MC
1
60
45
105
45
2
30
42.5
72.5
40
3
20
40
60
35
4
15
37.5
52.5
30
5
12
37
49
35
6
10
37.5
47.5
40
7
8.57
38.57
47.14
45
8
7.5
40.63
48.13
55
9
6.67
43.33
50
65
10
6
46.5
52.5
75
Complete the following table:
P = 56
P = 40
P = 32
Will this...
Assume the cost data is for a perfectly competitive firm: Q AFC AVC ATC MC 1...
Assume the cost data is for a perfectly competitive
firm:
Q
AFC
AVC
ATC
MC
1
60
45
105
45
2
30
42.5
72.5
40
3
20
40
60
35
4
15
37.5
52.5
30
5
12
37
49
35
6
10
37.5
47.5
40
7
8.57
38.57
47.14
45
8
7.5
40.63
48.13
55
9
6.67
43.33
50
65
10
6
46.5
52.5
75
Complete the following table:
P = 56
P = 40
P = 32
Will this...
Suppose that a local firm faces the following demand curve: Q = 70 - (1/11)P The...
Suppose that a local firm faces the following demand curve: Q =
70 - (1/11)P
The firm had to make an upfront investment of $2000 and it costs
them $220 to produce each unit of output.
1) Graph the demand curve
2) Derive expression for marginal revenue. Graph it on the same
figure as (1).
3) Derive expressions for the average cost and marginal cost.
Graph on the same figure as (1) and (2).
4) Which Q should the firm...
A perfectly competitive firm faces a market-determined price of $25 for its product.
A perfectly competitive firm faces a market-determined price
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columns 3 and 4 for average total cost and marginal cost. b. Fill
in columns 5 and 6 for marginal revenue and profit margin. c. How
much output should the competitive firm...
Suppose that a perfectly competitive firm faces a market price of $5 per unit, and at...
Suppose that a perfectly competitive firm faces a market price
of $5 per unit, and at this price, the upward-sloping portion of
the firm's marginal cost curve crosses its marginal revenue curve
at an output level of 1,500 units. If the firm produces 1,500
units, its average variable costs equal $5.50 per unit, and its
average fixed costs equal $0.50 per unit. What is the
firm's profit-maximizing (or loss-minimizing) output level?
nothing. (Enter your response as a whole number long dash—...
A firm with market power faces the following estimated demand and average variable cost functions: Qd...
A firm with market power faces the following estimated demand
and average variable cost functions:
Qd = 39,000 - 500P + 0.4M - 8,000PR
AVC = 30 - 0.005Q + 0.0000005Q2
where Qd is quantity demanded, P is price, M is income, and PR is
the price of a related good. The firm expects income to be $40,000
and PR to be $2. Total fixed cost is $100,000. What price should
the firm charge in order to maximize profit?
$42.50...
A firm is operating in the perfectly competitive market for gummy bears. It faces the following...
A firm is operating in the perfectly competitive market for
gummy bears. It faces the following conditions:
TC(q)=4+ (q2/16 )
MC(q)=q/8
Market Demand: D(P)=1008-200P
Please answer the following questions.
Suppose market price is currently at $2.
a) What is the profit maximizing quantity for the firm to
produce at?
b) What is the profit for the firm at the profit maximizing
quantity?
c) If all firms are identical to this firm, how many firms must
there be in the market?...
Suppose that a given firm has the following total cost and marginal cost functions: C(q) =...
Suppose that a given firm has the following total cost and
marginal cost functions: C(q) = 50+5q+ 5q 2 , MC(q) = 5+10q. 2
(a) Write down expressions for the fixed cost, average fixed
cost, average total cost and average variable cost associated with
this production function. In addition, identify the quantity at
which average total cost is minimized.
(b) Consider the restaurant industry. Provide an example of a
fixed cost, variable cost, and sunk cost. Be sure to justify...
Suppose a business firm faces the following demand equation: Q = 40 – 0.5P. Marginal cost...
Suppose a business firm faces the following demand equation: Q =
40 – 0.5P. Marginal cost is MC = $20.
a. Suppose the firm applies the two-part pricing strategy.
Compute the fixed fee, variable (per unit) fee, output, revenue and
cost associated with this pricing.
b. What type of businesses should consider implementing the
two-part pricing strategy? Please explain.
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