Question

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, Arkansas. This month, Jill's 34 workers produced 690 machines. Suppose Jill adds one more worker and, as a result, her factory's output increases to 700. Jill's marginal product of labor from the last worker hired equals ________.

A) 10 B) 20 C) 690 D) 700 Q1. Perfect Competition: Please explain and illustrate graphically how the diaper service market has been affected by the decrease in the North American birth rate and the development of disposable diaper. Explain the long-run and the short-run effects of the event, starting from the long run equilibrium. What happens to the price of diaper and the quantity of diaper in the market and a representative individual firm? (Show two diagrams for both market firms and an individual firm)

Q4. A firm has a production technology given by: Q =(L0.75)(K0.25 ) Initial input prices are given by w =$150 and r = $50. The firm wants to produce Q=100 units of output. Find the minimizing cost of labors and capitals subject to the production function.

Q5. Consider the market demand for coffee is Qd = 20 – P and the market supply for coffee is Qs=P. The competitive firm’s total cost is 4q2

a. what is the firm profit maximizing output

b. Calculate the total cost

c. Calculate economic profit

d. Can this be a long run equilibrium? Why?

Q6. The monopolist produces and distributes the Cartoon Magazine. Demand is given by P = 1200-10Q. The cost function is TC = 200Q+15Q2

a. What output maximizes its profit?

b. What is the profit-maximizing price?

c. Calculate the consumer surplus at the profit-maximizing price?

d. Calculate the producer surplus at the profit-maximizing price?

e. Calculate the deadweight loss at the profit-maximizing price?

f. What are outputs and price if the monopolist wants to maximize total social surplus?

Q7. A monopolistically competitive firm faces the inverse demand function P= 200-2Q TC= 100+2Q2

a. Solve for the profit maximizing price and quantity in the short run. P=ATC

b. Solve for the profit maximizing price and quantity in the long run. P=ATC

Answer #1

1. Ans: can; cannot

**Explanation:**

Short run is a period in which some factors of production are fixed and some are variable. In the short run, the quantity of variable factors (Such as labor) can be increased, but fixed factors (such as plant size) can not be increases.

Thus, option [B] is correct answer.

2. Ans: 10

**Explanation:**

Marginal product is defined as the additional units of output produced by the employment of an additional unit of variable factor (i.e., labor).

MP = ∆TP / ∆L.

Thus, option [A] is correct answer.

a) Assume the firm operates in the monopoly market in the long
run with the demand function P = 100-Q and TC = 640 + 20Q with TC
showing the total cost of production, Q and P respectively of
output quantity and price. Using the information above,
publish
i) Total revenue function (TR)
ii) Marginal revenue (MR)
iii) Marginal cost function (MC)
iv) Determine the level of price and quantity of production that
maximizes profit
v) Determine the amount of...

Question 1
In order for a monopolist to earn an economic profit in
short-run equilibrium, marginal revenue must be equal to zero.
True
False
____________________________________________________
Question 5
Which of the following is true for the monopolist?
Marginal revenue is less than the price charged.
Economic profit is possible in the long-run.
Profit maximizing or loss minimizing occurs when marginal
revenue equals marginal cost.
All of the above.
None of the above.
_________________________________________________________
Question 12
An industry is said to be...

1. For a perfectly competitive firm in the short run,
the ____________ price is at minimum average variable cost and the
break-even price is at minimum ________ cost.
a. Shut-down: Marginal
b. Shut-down: Average
c. Operating: Average
d. Operating: Marginal
2. The short-run supply curve for a perfectly
competitive firm is a _______ line at zero quantity if the price is
below minimum average variable cost but is the marginal cost if the
price is at or above minimum...

Consider a total cost function of TC = 0.5Q^2 +10Q + 20 and the
market demand function Q=70-p.
a What is the profit-maximizing output and price for the perfect
competition? Calculate its profit.
b What is the profit-maximizing output and price for the
monopolist? Calculate its profit.
c What is the profit-maximizing output and price for the
monopolist in the second market? Calculate its profit.

(a) Draw a figure to scale showing the short-run and
long-run equilibrium of the firm on the assumption that the firm,
but not the industry, has transitioned to their long-run
equilibrium (that is, after changing their plant size but before
entry/exit of other firms). Use the following information to piece
it together: P = $30; the least-cost input combination of producing
q = 2 costs $60; the minimum efficient scale is at q = 8, with LAC
= $12.50 at...

(a) Draw a figure to scale showing the short-run and
long-run equilibrium of the firm on the assumption that the firm,
but not the industry, has transitioned to their long-run
equilibrium (that is, after changing their plant size but before
entry/exit of other firms). Use the following information
to piece it together: P = $30; the least-cost input
combination of producing q = 2 costs $60; the minimum efficient
scale is at q = 8, with LAC = $12.50 at...

1. Consider a monopolist where the market demand curve
for the produce is given by P = 520 - 2Q. This monopolist has
marginal costs that can be expressed as MC = 100 + 2Q and total
costs that can be expressed as TC = 100Q + Q2 + 50. (Does not need
to be done. Only here for reference)
2. Suppose this monopolist from Problem #1 is regulated
(i.e. forced to behave like a perfect competition firm) and the...

The table below shows output, fixed, variable, and total costs
for a firm in a perfectly competitive market.
Output
Fixed Cost (FC)
Variable Cost (VC)
Total Cost (TC)
Avg. Fixed Cost (AFC)
Avg. Variable Cost (AVC)
Avg. Total Cost (ATC)
Marginal Cost (MC)
0
5
0
1
7
2
10
3
9
4
19
5
25
1. Fill in the blank spaces in the fixed, variable, and total
cost columns. Also complete the AFC, AVC, ATC, and MC columns
(round...

Suppose the demand model and the cost function facing
a firm is expressed as
P= 120-5Q and
TC= 20+ 30Q + 2Q2
1. Calculate
i. the
profit maximizing equilibrium level of output that the monopolist
will produce
ii. the
price that the monopolist would charge
iii. and
the profit of the monopolist

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...

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