Calculate bwbs new long-run equilibrium demand curve

Assignment Help Econometrics

Reference no: EM13232168

Bow Wow Bazaar is a growing firm specializing in gourmet dog food and supplies in Florida resort communities. BWB's demand and cost information are as follows:
P = 4500 - Q
MR = 4500 - 2Q
TC = 150,000 + 400Q
MC = $400

where Q is output, P is price in dollars, MR is marginal revenue, TC is total cost and MC is marginal cost. All costs include a normal return of 12% on capital investment. Show all work in your answers.

A. Determine the profit-maximizing price and output levels, and the profit earned.
MR=MC
4500-2Q=400
-2Q=-4100
Q=2050

P=4500-2050
P=2450

B. Based on your results in Part A and assuming the firm operates in a monopolistically competitive industry, explain what will happen to this industry in the long run?

C. Determine the output level, price, and profits that will occur in long-run equilibrium. Assume a high-price, low-output scenario assuming a parallel shift of the firm's demand curve. Be sure to explain what you are doing and why. Hint: The slope of the ATC curve is -$150,000/Q2.

D. Calculate BWB's new long-run equilibrium demand curve.

Reference no: EM13232168

Questions Cloud

Why do people procrastinate : Why do people procrastinate? Give an example of how procrastination can impact a person's effectiveness. What are three techniques to overcome procrastination?

What should tracy do about this situation : She always has everything done in a timely manner and her books balance at the end of every day. What should Tracy do about this situation?

Social psychology concept matrix : : Social Psychology Concept Matrix

How might a negative base salary be implemented in reality : The value of a successful project is $420,000; the probabilities of success are 1/2 with good supervision and 1/4 without. The manager is risk-neutral, not risk-averse as in the text, so his expected utility equals his expected income minus his di..

Calculate bwbs new long-run equilibrium demand curve : Determine the output level, price, and profits that will occur in long-run equilibrium. Assume a high-price, low-output scenario assuming a parallel shift of the firm's demand curve. Be sure to explain what you are doing and why.

Fully insured person visit the physician : How many times would this fully insured person visit the physician?

What is the quantity of households : What is the quantity of households that would subscribe at a price of $0?

The quantity demanded of corn increase percent : What percentage would the quantity demanded of corn increase?percent.

No harmful effects on employment : "Output per worker is expected to increase by 10 percent during the next year. Therefore, wages can also increase by 10 percent with no harmful effects on employment, output prices, or employer profits." Analyze this statement.

User Account

All Pages