The market demand curve is P = 90 − 2Q, and each firm’s total cost function is C = 100 + 2q²

(a) (7 points) Suppose there is only one firm in the market. Find the market price, quantity, and the firm’s profit.

(b) (5 points) Show the equilibrium on a diagram, depicting the demand function D (with the vertical and horizontal intercepts), the marginal revenue function MR, and the marginal cost function MC. On the same diagram, mark the optimal price P, the quantity Q, and the average total cost ATC. Illustrate the firm’s profit. Hint: You don’t need to draw the ATC curve.

(c) (5 points) Using the demand function, find the elasticity of demand at the monopoly price and quantity.

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

Donny;s Burgers is a price taker. Its costs are

A) What is Donny's shut-down point?

B) What is the profit maximizing quantity and economic profit if the price is $21 a dish?

C) We are assuming that the above total cost is the total variable cost. Now, suppose that we introduce a fixed cost equal to 10. Redo Question 22 to compute the price at which the firm will break even.

All firms in a perfectly competitive industry have a long-run total cost function of T C(Q) = 36Q − 4Q² + 2Q³. The market demand curve is Q^D = 640 − 10P. The price of inputs is not affected by the industry output.

a) Find the (long-run) average cost and marginal cost curves.

b) What quantity will each firm produce in the long run?

c) What will be the market price in the long run?

d) What will be the total quantity supplied by all firms in the long run?

e) How many firms will operate in the industry in the long run?

f) Write down an expression for the long-run supply curve.

A perfect competitive firm faces the total cost TC=150+2q².

a. If the market price p=80, how much output will the firm produce?

b. At p=80, what is the firm’s profit?

c. Find the quantity of output for which marginal cost equals average variable cost. What does the information tell you about the firm’s decision about whether to shut down?

3) Perfectly competitive markets

# of Contraptions

Total Cost

0. 0 500

1. 1 580

2. 2 640

3. 3 690

4. 4 730

5. 5 760

6. 6 800

7. 7 850

8. 8 950

9. 9 1200

10. 10 2000
    c) If market price equals $100, how many units should be produced? What is revenue? What is profit? Add these columns to your Table too. d) What is the fixed cost? Would the number of units produced change if the fixed cost went down? Why or why not?

e) Firms now exit the contraption market, and contraption price goes up to $250. Graph this result, showing market and firm graph side by side. How many units will a firm with the above cost function produce? What will profit be? (It might be helpful to show a new Table or at least add a couple of columns to the existing one).

f) At this point, will more firms exit, or will new firms start to enter the market? Explain.
g): What is the long run equilibrium price? What is profit? (Show all calculations) Why will firms not leave the market?

A monopolist has a demand curve given by P = 92 - 8Q and a total cost curve given by TC = 60Q.

3. The associated marginal cost curve is MC = 60. What is the monopolist's marginal revenue curve?
   1. MR = 70 - 8Q
   2. MR = 92 - 16Q
   3. MR = 70 - 8Q
   4. MR = 56 - Q
   5. none of the above

4. And what is the monopolist's profit maximizing quantity?
   1. 2
   2. 6
   3. 18
   4. 9
   5. none of the above

5. And what price will the monopolist charge?
   1. 50
   2. 76
   3. 9
   4. none of the above

6. And how much economic profit will the monopolist earn?
   1. 36
   2. 32
   3. 90
   4. d. 162
   5. e. none of the above

Currently, the unit selling price of a product is $310, the unit variable cost is $250, and the total fixed costs are $918,000. A proposal is being evaluated to increase the unit selling price to $340.

a. Compute the current break-even sales (units).
units

b. Compute the anticipated break-even sales (units), assuming that the unit selling price is increased and all costs remain constant.
units

Break-Even Sales and Sales to Realize Income from Operations

For the current year ended October 31, Friedman Company expects fixed costs of $340,000, a unit variable cost of $40, and a unit selling price of $60.

a. Compute the anticipated break-even sales (units).
units

b. Compute the sales (units) required to realize income from operations of $78,000.
units

Contribution Margin and Contribution Margin Ratio

For a recent year, McDonald's Company-owned restaurants had the following sales and expenses (in millions):

Assume that the variable costs consist of food and packaging, payroll, and 40% of the general, selling, and administrative expenses.

a. What is McDonald's contribution margin? Round to the nearest million. (Give answer in millions of dollars.)
$ million

b. What is McDonald's contribution margin ratio?
%

c. How much would income from operations increase if same-store sales increased by $1,100 million for the coming year, with no change in the contribution margin ratio or fixed costs? Round your answer to the closest million.
$ million

a. Young Company budgets sales of $1,120,000, fixed costs of $50,400, and variable costs of $224,000. What is the contribution margin ratio for Young Company? (Enter your answer as a whole number.)
%

b. If the contribution margin ratio for Martinez Company is 45%, sales were $555,000, and fixed costs were $199,800, what is the income from operations?

Facts relate to Company C:

Unit selling price of widget: $250.00

Unit variable cost: $125.00

Total Fixed Costs: $350,000.00

Units sold during the year: 2,200

Questions to answer:

1. Calculate breakeven number of units

2. Calculate the contribution margin ratio

3. Calculate breakeven amount in dollars

4. What is the linear equation for the total cost curve?

5. The company wishes to target net income of $100,000. How many widgets must the company sell to reach the amount?

6. Calculate the margin of safety in dollars depending on the units sold and. the breakeven dollars.

Fact change: The company decides to purchase a new piece of equipment, fixed costs will increase by 15% and variable costs will decrease by 15%.

Whats the new breakeven number of units?

Fact change: The company's supplier is increasing prices. This will result in additional $10 in variable costs per unit. Because of competition, the company does not want to increase price per unit of the finished widgets.

What is the company's new breakeven in number of units?

What is the company's new breakeven in sales dollars?

Answer A-F using chart

1. Write the journal entry to move these costs from WIP-Assembly Inventory account to Finished Goods Inventory account. Post the JE to the WIP-Assembly and Finished Goods T-accounts

2. Write the journal entry to record the requisition of raw materials, both Packaging and Other direct material for the Assembly department during May. Post the journal entry to the T accounts

3. Assume Conversion costs added to the Assembly department during May consisted of 40% direct labor and the rest was factory overhead. Write the journal entry to record the direct labor charged to WIP-Assembly during May. Post the JE to the T Account

4. The rest of the conversion costs (60%) charged to WIP-Assembly was factory overhead. Write the journal entry to record the factory overhead. Post the JE to the T accounts

5. Determine the ending balance for WIP-Assembly account. Balance should equal the amount calculated in the table of 5) for ending work-in-process inventory for Assembly department.

6. Assume the company uses no indirect material and the Raw Material Inventory began the month with $120,000 and ending the month with $98,000. How much raw material inventory did the company purchase during May? _______________ Write the summary journal entry to record the purchase of raw material assuming it was all purchased on account. Post the journal entry to the T-account