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Grand Canyon ECN601 Module 4 problems




Question;Problem 22-1;1. Use the following to calculate profit at each quantity;of output.;(Total) Output;(Q);Price;(P);Total;Revenue;(TR);Total Cost;(TC);Profit;0;$1,900;$0;$1,000;1;$1,700;$1,700;$2,000;2;$1,650;$3,300;$2,800;3;$1,600;$4,800;$3,500;4;$1,550;$6,200;$4,000;5;$1,500;$7,500;$4,500;6;$1,450;$8,700;$5,200;7;$1,400;$9,800;$6,000;8;$1,350;$10,800;$7,000;9;$1,300;$11,700;$9,000;2. Use the table in exercise 1 to calculate marginal revenue;and marginal cost.;3. Use the information in exercises 1 and 2 to graphically show;maximum profit. Label the profitmaximizing quantity and price, total cost;total revenue, and profit.;(Total) Output;(Q);Price;(P);Total;Revenue;(TR);Total Cost;(TC);0;$1,900;$0;$1,000;1;$1,700;$1,700;$2,000;2;$1,650;$3,300;$2,800;3;$1,600;$4,800;$3,500;4;$1,550;$6,200;$4,000;5;$1,500;$7,500;$4,500;6;$1,450;$8,700;$5,200;7;$1,400;$9,800;$6,000;8;$1,350;$10,800;$7,000;9;$1,300;$11,700;$9,000;5. Use the following information to calculate accounting profit;and economic profit.;Sales $100;Employee expenses $40;Inventory expenses $20;Value of owner?s labor in any other enterprise $40;(Total) Output;(Q);Price;(P);Total;Revenue;(TR);Total Cost;(TC);0;$1,900;$0;$1,000;1;$1,700;$1,700;$2,000;2;$1,650;$3,300;$2,800;3;$1,600;$4,800;$3,500;4;$1,550;$6,200;$4,000;5;$1,500;$7,500;$4,500;6;$1,450;$8,700;$5,200;7;$1,400;$9,800;$6,000;8;$1,350;$10,800;$7,000;9;$1,300;$11,700;$9,000;11. Use the information in the table to calculate total;revenue, marginal revenue, and marginal cost. Indicate;the profit-maximizing level of output. If the;price was $3 and fixed costs were $5, what would;variable costs be? At what level of output would the;firm produce?;Output;Price;Total Costs;TR;MR;MC;1;$5;$10;$5;2;$5;$12;$10;$5;$2;3;$5;$15;$15;$5;3;4;$5;$19;$20;$5;4;5;$5;$24;$25;$5;5;6;$5;$30;$30;$5;6;7;$5;$45;$35;$5;15;The profit maximizing level of output is at five units, where;marginal equals marginal cost.;1. Cost figures for a hypothetical firm are given in the;following table. Use them for the exercises below.;The firm is selling in a perfectly competitive market.;Output;Fixed;Cost;AFC;Variable;Cost;AVC;Total;Cost;ATC;MC;1;$50;$50;$30;30;2;$50;$25;$50;20;3;$50;$16.67;$80;30;4;$50;$12.50;$120;40;5;$50;$10;$170;$34;$220;$44;50;a. Fill in the blank columns.;b. What is the minimum price needed by the firm;to break even?;c. What is the shutdown price?;d. At a price of $40, what output level would the;firm produce? What would its profits be?;14. Use the following data for the exercises below.;Price;Quantity;Supplied;Quantity;Demanded;$20;30;0;$18;25;5;$16;20;10;$14;15;15;$12;10;20;$10;5;25;$8;0;30;a. What is the equilibrium price and quantity?;b.Draw the demand and supply curves. If this;represents perfect competition, are the curves;individual-firm or market curves? How is the;quantity supplied derived?;c. Show the consumer surplus. Show the producer;surplus.;d. Suppose that a price ceiling of $12 was imposed.;How would this change the consumer and producer;surplus? Suppose a price floor of $16 was;imposed. How would this change the consumer;and producer surplus?;6. In the following figure, if the monopoly firm faces ATC1;which rectangle measures total profit? If the monopoly firm faces ATC2, what is;total profit?;What information would you need in order to know whether the;monopoly firm will shut down or continue producing in the short run? In the;long run?;8. Consider the following demand schedule. Does itapply to a perfectly competitive firm? Compute marginal;and average revenue.;11. The cement industry is an example of an undifferentiated;oligopoly. The automobile industry is a differentiated oligopoly. Which of;these two is more likely to advertise? Why?;13. Use the payoff matrix below for the following exercises.;The payoff matrix indicates the profit outcome;that corresponds to each firm?s pricing strategy.;Firm;A?s Price;$20;$15;Firm;B?s;Price;$20;Firm;A earns $40;profit;Firm;A earns $35;profit;Firm;A earns $40;profit;Firm;B earns $39;profit;$15;Firm;A earns $49;profit;Firm;A earns $38;profit;Firm;B earns $30;profit;Firm;B earns $35;profit;a. Firms A and B are members of an oligopoly.;Explain the interdependence that exists in oligopolies;using the payoff matrix facing the two;firms.;b. Assuming that the firms cooperate, what is the;solution to the problem facing the firms?;c. Given your answer to part (b), explain why;cooperation would be mutually beneficial and;then explain why one of the firms might cheat.


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