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##### Grand Canyon ECN601 Module 4 problems

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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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