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1. Bob Edwards owns a bagel shop. Bob hires an economist who assesses the shape of the bagel shop's average total cost (ATC) curve as a function of the number of bagels produced. The results indicate a U-shaped average total cost curve. Bob's economist explains that ATC is U-shaped for two reasons. The first is the existence of diminishing marginal product, which causes it to rise. What would be the second reason? Assume that the marginal cost curve is linear. (Hint: The second reason relates to average fixed cost)
2. Explain how a firm in a competitive market identifies the profit-maximizing level of production. When should the firm raise production, and when should the firm lower production?
3. At its current level of production a profit-maximizing firm in a competitive market receives $12.50 for each unit it produces and faces an average total cost of $10. At the market price of $12.50 per unit, the firm's marginal cost curve crosses the marginal revenue curve at an output level of 1,000 units. What is the firm's current profit? What is likely to occur in this market and why?
4. There has been much discussion of deregulating electricity and natural gas delivery companies in the United States. Using your understanding of monopolies, discuss the likely effect of deregulation on prices in these two industries.
5. Explain the output and price effects which affect the profit-maximizing decision faced by the firm in oligopoly market. How does this differ from output and price effects in monopoly market?
In the imperfect competitive market of jeans, Lean Jeans, Inc., recently offered rebates of $1 off the regular $50 price. Quantity sold jumped 4 more jeans from the previous 100 figure the previous month.
Describe why the results of computing cross-price elasticity can be useful in determining product relationships. In your explanation, contrast the different numerical values of cross-price elasticity and what each value indicates.
What is the law of diminishing returns? Can you provide an example of when diminishing returns have set in (could set in) at a work place?
Give a brief summary of economic costs. In the short-run, why might a firm still operate even when there is a loss.
What is the difference between explicit and implicit costs? Which of the costs is most closely associated with opportunity costs and why?
A firm has a cost function given by the following: Find the firm's production function, y= f(x1, x2).
The demand for personal computers can be characterized by following point elasticity = -5, cross-price elasticity with software = -4, and income elasticity = 2.5. Indicate whether each of following statements is true or false, and describe your an..
Comment on the statement. Do you agree with the speaker? Explain. Use a graph to illustrate the answer indicating the firm's short-run cost structure
What happens to the student's budget line? Illustrate the change with new books on the vertical axis. Is the student worse off or better off after the price change. Explain.
Find out the own price elasticity of demand and state whether demand is elastic, inelastic or unitary elastic. Determine the income elasticity of demand state whether good X is normal or inferior
What is the profit-maximizing level of output of master cream (in bottles)? What is the profit-maximizing price? What is the maximum level of profit?
Explain how this transaction would be recorded in your firm's financial statements. Additionally, your hospital has experienced negative levels of net income for the last five years. The total amount of accumulated deficits is $5 million
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