[Monopoly Pricing] A monopolist operates with the following data on cost and de- mand. It has a total fixed cost of $1,500 and a total variable cost of Q2, where Q is the number of units of output it produces. The market demand function is Qd = 60 − 0.5P . The firm expects the conditions of demand and cost to continue in the foreseeable future.

1. (a) What is the profit maximizing monopoly price and quantity?

2. (b) What is the dead weight loss from the monopoly pricing?

3. (c) Should the firm continue to operate in the short run, or should it shut down? Explain briefly.

For the average consumer, the cost of purchasing insurance is greater than expected payoff from the insurance.

True

False

Average total cost is important to a business because

Multiple Choice

a) It tells the firm what the profit per unit produced is.

b) It always declines as more output is produced.

c) It tells the firm what its fixed costs are.

d) It is an indicator of the production function.

Create a cost-benefit analysis for regulating the sharing economy in Canada. Identify the stakeholders.

Suppose that a firm in a monopolistically competitive market has a cost function of TC= 100,000 + 20Q.

1. What is the marginal cost function?
2. If the price elasticity of demand is currently -1.5, what price should the firm charge?
3. What is the marginal revenue at the price computed in part b)?
4. If a competitor develops a substitute product and the price elasticity of demand increases to -3.0, what price should the firm now charge?

Suppose that a competitive firm faces a market price of $8, an average variable cost of (AVC) or 7, fixed costs of ($400) and is maximizing their profits by producing 200 units.  Will the firm produce in the short run?  Will the firm produce in the long run?

True/False. Explain.  If a PPF is concave, then this reflects the principle of decreasing opportunity cost and can be explained by perfect transferences of resources.

What is the opportunity cost for a company paying a worker $15? Can the company continue to pay $15/hr if the market wages are $20? Explain why and how.