1) List the five characteristics of pure monopoly.

2) Describe the demand curve facing a pure monopoly and how it differs from that facing a firm in a purely competitive market.

3) Explain why the marginal revenue is equal to the price in pure competition but not in monopoly.

4) Use the chart to solve the following:

Calculate the Marginal Cost at Q 100?

Calculate the Marginal Cost at Q 200?

Calculate the Marginal Cost at Q 300?

Calculate the Average Total Cost at Q 100?

Calculate the Average Total Cost at Q 200?

Calculate the Average Total Cost at Q 300?

Question 4.3

Rolling in Dough current produces 540 units of standard bread and 130 units of gluten-free bread per day. The capacity of Rolling in Dough is 720 units. Thus, it has the capacity to produce and additional 50 units of bread per day. A client has requested 100 units of a special seed blend for use in their restaurant with a selling price of $9.75 per unit and variable costs of $4.50 per unit. Based on this information, should Rolling in Dough accept the order if

 They may accept as much or as little of the 100 units they want

 Must provide all 100 units of the bread.

1. Use the information provided to complete the necessary calculations.

2. Make a recommendation for Rolling in Dough with full justification.

Use the information below to answer the following questions.

The demand and supply curves facing a company producing a brand of coconut juice, orange Juice, are respectively given as follows:Qd =50-5PQs=2+3P.The company is contemplating to increase the price of the orange juice as a measure to raise more revenue to support a planned expansion programme.

Questions
i.What is the equilibrium price and quantity for the orange Juice?
ii. What is the price elasticity of
demand for the orange Juice?
iii. As the marketing director of the company do you consider the intended increase in price of orange Juice advisable? Explain your choice.
iv. How best can the company achieve its objective of raising more revenue?

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A textbook publisher is in monopolistic competition. This company cannot sell books at a price of $ 100 pesos per book. But for every decrease of $ 10 pesos that you make to the price, the number of books you sell increases by 20 books a day. The fixed cost of the company is $ 2,400 pesos a day. The average variable cost and the marginal cost of the company is constant at $ 20 pesos per book. If the company spends $ 1,200 a day on advertising, it can increase the number of books sold at each price by 50%. Compared to the situation where advertising is not used, how is the price that maximizes the company's profits when advertising is used?

a) Increase by $ 5.

b) It does not change.

c) Decreases by $ 10.

d) Increase by $ 10.

Suppose that Economica is a large country. The export supply curve is as follows Price Quantity 60 60 80 120 100 180 120 240 Assume that Economica imposes a $20 tariff on imported oil. Assume that the world price of oil is initially $80. a. Graph the import demand and export supply curves Calculate b. the price of oil in Economica c. the price of oil in the Rest of the World d. The change in producer surplus e. The change in consumer surplus f. Tariff revenue 20(180)-120 g. Oil imports h. the terms of trade effect i. total deadweight loss in the home country Bonus j. effect on foreign welfare k. effect on world welfare

The Saunders Investment Bank has the following financing outstanding.

Debt:

150,000 bonds with a coupon rate of 11 percent and a current price quote of 108; the bonds have 20 years to maturity. 320,000 zero coupon bonds with a price quote of 16 and 30 years until maturity. Assume semiannual compounding.

Preferred stock:

240,000 shares of 9 percent preferred stock with a current price of $67, and a par value of $100.

Common stock:

3,500,000 shares of common stock; the current price is $53, and the beta of the stock is .9.

Market:

The corporate tax rate is 25 percent, the market risk premium is 8 percent, and the risk-free rate is 5 percent. What is the WACC for the company?

Use the data in the table about Homer’s Donuts to answer the questions below:

a. Complete the table assuming a price of $1.00.   

b. Assuming the price of donuts is $1.00, and the market wage is $8 an hour, what is the maximum number of workers Homer will hire?  

__________________________

c. If the price of donuts rises to $2.00 and wages stay the same, how many workers will Homer’s Donuts hire?

__________________________

d. If the price of donuts is $1.00 and wages rise to $15 an hour, what is the maximum number of workers Homer will hire?  

__________________________

QUESTION 5

M&M Manufacturing Co. supplies automotive parts in three outlets in Denver. The inverse demand equations faced by each outlet are as follows:

Outlet 1:          P = 150 – 2.50 Q₁

Outlet 2:          P = 200 – 8.40 Q₂

Outlet 3:          P = 450 – 0.75 Q₃

1. If the firm charges $100 per unit, determine the quantity demanded by each outlet.
2. Given the price, compute the own price elasticity for each outlet and identify which outlet is the most responsive to price change. Why?

If M&M Manufacturing Co. plans to increase the price by 10 percent, do you think the Company is making a right decision? Explain your answer.

1. Suppose the equilibrium price for an average hospital stay in the absence of insurance is $10,000. At that price, 1000 people are hospitalized each year. Now suppose an insurer offers a policy to lower the out of pocket price of a stay to $100, and at that price, 1200 people are hospitalized.

a) How much TOTAL premium revenue must be collected to finance this arrangement?

b) How much premium revenue per hospitalized person must be collected? Would the average person be willing to pay this premium if they were risk averse?

c) Now suppose there are 120,000 people near this hospital, all of whom think they have an equal chance (1%) of being hospitalized. What must the per person premium be now?

1-month European call options for Apple (AAPL) with a strike price of $235/share sell for $1.50/share when Apple stock trades at $225/share. Each call contract is for 100 shares of Apple stock.

a. If Apple share price at maturity ends up being $230/share what is the payoff and profit for the long call buyer?

b. If Apple share price at maturity ends up being $230/share what is the payoff and profit for the short call seller?

c. What is the profit break-even stock price for the long call buyer?

d. Draw a diagram showing the payoff and profit for the investor under different stock prices at maturity.