Face masks are manufactured by identical shops (and sold on Etsy). Each shops's total cost of production is equal to 0.5q²+4q+18

where q is the number of masks produced.

The demand for masks is given by Q=1800-60p

where Q is the quantity demanded and P is the price. How many masks will be sold? How many firms will there be in the mask industry?

Show your work.

Exercise 4. A publisher for textbooks has a total cost of TC(Q) = 25,000 − 50Q + 15Q^2.

a) Find the publisher’s marginal cost, average cost, average variable cost, and average fixed cost.

b) Find the value of Q for where the marginal cost curve crosses the average cost curve and average variable cost curve.

c) Find the output elasticity ε_TC,Q

The market demand curve is P = 90 − 2Q, and each firm’s total cost function is C = 100 + 2q 2 .

(d) (2 points) Verify that the monopoly price and quantity satisfy the monopolist’s rule of thumb for pricing.

(e) (3 points) What is the monopolist’s factor markup of price over marginal cost?

(f) (4 points) How does the monopolist’s factor markup of price over marginal cost compare to that of a perfectly competitive firm?

A monopolist facing a market demand Q = 240 – 2p has the total cost function TC(q) = q².

1. What is the monopolist’s profit maximizing quantity and price? How many units are produced in each plant?

Now the government notices that the monopolist is actually composed of two production plants, the first plant has a total cost function TC1(q) = 2q^2+ 16q

2. Derive the marginal cost of the second plant, MC2(q).

a. Monopolist faces the following demand curve: P = 510 - 0.7Q; its total cost is given by: TC = 800 + 0.15Q Find marginal cost and marginal revenue

b. Monopolist faces the following demand curve: P = 520 - 0.7Q; its total cost is given by: TC = 800 + 0.3Q Find marginal cost and marginal revenue

A supervisor was given a report which contains the graph of his company's average total cost, average variable cost, average fixed cost and the marginal cost curve curves. The intern who wrote the report forgot to label the graphs but did the graph correctly and put all the costs on one graph with cost in dollars on the vertical axis and the quantity of output on the horizontal axis. A supervisor who learned his/her costs curves properly in college microeconomics would know that the firm's marginal cost curve is the curve which:

A. decreases as the quantity of output increases

B. crosses the average fixed cost curve at its minimum point

C. lies above the average variable cost curve

D. crosses both the average total cost curve and the average variable cost curve at their minimum points

5. In a certain market in the long-run, suppose the total cost function for each firm and potential entrant is given by TC = 5Q³ -10Q².+20Q. Market demand is given by D(P)= 2000 - 100P .

1) In equilibrium, how many units will each firm produce?

2) What is the market equilibrium price?

3) What is total market demand?

4) What is the equilibrium number of firms in the long-run?

53

If we drew a graph where the market price, marginal cost, & the Average Total Cost all intersected at one point, then we would be correct to say that this point represents the economic breakeven point.

True or False

54

If the income elasticity for a product was calculated to be a negative -0.50, then you are probably dealing with an inferior good rather than a necessity.

True or False

55

How do we know that we have a situation of “Diseconomies of Scale?”

Multiple Choice

• The Marginal Cost Curve shifts up as production expands

• The Long-Run Average Total Cost Curve curves up as production expands

• The Long-Run Average Fixed Cost Curve shifts up as production expands

• Economics is driving me crazy

56

If a U.S. business owner operating in a foreign country is forced to pay illegal bribes to corrupt government officials, then according to microeconomic theory those bribery payments would be classified as an “implicit cost.”  

True or False

heffield Corp. has several outdated computers that cost a total of $19400 and could be sold as scrap for $6000. They could be updated for an additional $2500 and sold. If Sheffield updates the computers and sells them, net income will increase by $9000. What amount would be considered sunk costs? $19,400

1. A project has a total up-front cost of $435.44. The cash flows are $100 in the first year, $200 in the second year, and $300 in the third year. What’s the IRR? If we require an 18 percent return, should we take this investment?