Question

**I only want the answer of problem 2**

1.There is only one least-cost way to make wooden boxes for shipping tomatoes, and any firm that makes

them has a cost function given by C = 200 + q +.005q2. The inverse market demand for boxes is given by

p = 10?.005Q. There is currently only one firm in the industry and it is able to act as a monopolist.

(a) What is its output and what price does it charge for boxes?

(b) What is the firm's profit at this output level?

(c) Does the firm have any producer's surplus? Support your answer by calculating it.

(d) What is the magnitude of consumer's surplus in this situation?

2.Suppose now that the firm in problem 1 can no longer exclude others from using the same technology and

producing boxes, so the market structure changes from monopoly to perfect competition. (That is, assume that

all firms adopt the least-cost technology, and all produce at minimum average cost in equilibrium.)

(a) What will the market price and quantity be?

(b) How large is consumer's surplus under this market structure?

(c) How large are aggregate producer profits and producer's surplus?

(d) Comparing the two market structures for this industry, which has a larger social surplus (sum of producer's and consumer's surplus)?

Answer #1

The goal of this problem is to compare perfect competitive
outcome (scenario 1) with monopoly outcome (scenario 2). In both
two scenarios, market demand is given by Q=1200-50P.
Scenario 1: Consider a perfectly competitive market with 150
identical firms. Each firm’s marginal costs are given by MC=q+4.
(4pts) Determine the equation for market supply curve. Find the
equilibrium price and industry output.
1. Determine the equation for market supply curve. Find the
equilibrium price and industry output.
2. Plot the...

A company is a monopolist in the door industry. The total cost
is C = 100 - 5Q + Q^2 and the inverse demand is P = 55 - 2Q.
x. Determine the price that the company should set in order to
maximize profit. At what output does the firm produce? Determine
how much profit and consumer surplus would the company
generate.
y. Determine the output if the company was a perfectly
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Problem 1. A perfectly competitive painted necktie industry has
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cost structure such that long-run average cost is minimized at an
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the industry’s long-run supply schedule? b. What is the long-run
equilibrium price (P*), the total industry output (Q*), and the...

No scan of handwritten answers
1. A monopolist faces a market demand curve given by Q = 53- P.
Its cost function is given by C = 5Q + 50, i.e. its MC =$5.
(a) Calculate the profit-maximizing price and quantity for this
monopolist. Also calculate its optimal profit.
(b) Suppose a second firm enters the market. Let q1
be the output of the first firm and q2 be the output of
the second. There is no change in market...

1. Compared with a perfectively competitive market a monopoly is
inefficient because
a. it raises the market price above marginal cost and produces a
smaller output.
b. it produces a greater output but charges a lower price.
c. it produces the same quantity while charging a higher
price.
d. all surplus goes to the producer.
e. it leads to a smaller producer surplus but greater consumer
surplus.
2. The demand curve of a monopolist typically...

Consider the following total cost function for an individual
firm:
C(q) = 10+ q + (1/4)q^2
The industry demand is estimated to be:
Q = 100 - P
1) Now suppose there is a monopolist facing the industry demand.
Write down the monopolist's pro t function.
2) What is the equation of the monopolists marginal revenue
function? Also, explain how the monopolist's marginal revenue
function differs from the marginal revenue function of a firm in a
long-run perfectly competitive market....

QUESTION 1 (20)
In each of the following cases only one answer is
correct. Write the letter that represents the correct answer, next
to each number. E.g. 1.11 a
1.1 Which one of the following statements is false?
a) Choice is necessary because of limited wants.
b) The means available to satisfy wants are limited.
c) The wants of human beings are unlimited.
d) The opportunity cost of producing a given commodity is the
value of the best forgone alternative...

Consider a Cournot model with two firms, firm 1 and firm 2,
producing quantities q1 and q2, respectively. Suppose the inverse
market demand function is: P = 450 – Q where Q denotes the total
quantity supplied on the market. Also, each firm i = 1,2 has a
total cost function c(qi) = 30qi. a) What is the Nash equilibrium
of this Cournot game ? What is the market prices ? Compute each
firm’s profit and the industry profit. b)...

1. In the short run, the firm ________ change the number of
workers it employs but ________ change the size of its plant.
A) can; can B) can; cannot C) cannot; can D) cannot; cannot
2.Jill runs a factory that makes lie detectors in Little Rock,
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Suppose Jill adds one more worker and, as a result, her factory's
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Problem 1
What is the difference between cost effectiveness and
efficiency?
Problem 2
Assume that the market demand curve for diamonds is given by the
following equation:
PD = 1000 ? 2 QE,
and the market supply curve, which is equal to the aggregated
marginal cost curve of all producers, is given by,
PS = 200 + 2 QU
Diamond production, however, is associated with harmful side
effects on both workers and nearby households and firms. The total
damage to...

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