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Suppose you have been tasked with regulating a single monopoly firm that sells 50-pound bags of concrete. The firm has fixed costs of $30 million per year and a variable cost of $4 per bag no matter how many bags are produced.a. If this firm kept on increasing its output level, would ATC per bag ever increase? (YesNo). Is this a decreasing-cost industry? (YesNo). b. If you wished to regulate this monopoly by charging the socially optimal price, what price would you charge?( $ per bag.) At that price, what would be the size of the firm’s profit or loss? At that price, the firm's profitloss equals $ million. Would the firm want to exit the industry? (YesNo). c. You find out that if you set the price at $5 per bag, consumers will demand 30 million bags. How big will the firm’s profit or loss be at that price?.d. If consumers instead demanded 40 million bags at a price of $5 per bag, how big would the firm’s profit or loss be? At that price, the firm's profitloss equals how many million? e. Suppose that demand is perfectly inelastic at 40 million bags, so that consumers demand 40 million bags no matter what the price is. What price should you charge if you want the firm to earn only a fair rate of return? Assume as always that TC includes a normal profit.$ per bag.
Why would a firm in a perfectly competitive market always choose to set its price equal to the current market price? If a firm set its price below the current market price, what effect would this have on the market? Discuss.
Elucidate each of the following statements using supply- and- demand diagrams. a. " When a cold snap hits Florida, the price of orange juice rises in supermarkets through-out the country."
Using a wholesale cost of $4 per case in each state, calculate the breakeven output quantities for each alternative.
In economic terms, when the wage rate increases we sometimes see the number of hours worked by individuals decrease now.
Consider an economy in which people live two-period lives in overlapping generations but are endowed only in the first period of life. Capital has a minimum size, k*, which is greater than the endowment of any single individual but less than the tota..
Snow peak Ski Resort offers a price for a lift ticket that is barely over its marginal cost, but the high equipment rental fee keeps generating big profits. Which pricing strategy is the management using?
After acquiring a substitute product, to achieve greater profitability, one should:
q.exercise 1graphically represent on the islmfx diagram the effects of the following cases use a new diagram for each
If marginal cost exceeds marginal revenue, a profit-maximizing monopolist will
A piece of equipment that was purchased two years ago for $59,000 was expected to have a useful life of 5 years with a $5,000 salvage value. Since its performance was less than expected, it was upgraded for $20,000 one year ago. Increased demand now ..
If firms can easily substitute another input for the one that has increased in price, there may be little increase in costs. If an input constitutes a large fraction of total costs, an increase in its price will raise costs significantly.
Whenever the amount of output produced is not as great as the amount that the economy is capable of producing, there is a positive GDP ___________ and cyclical unemployment will be the result.
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