Reference no: EM131388860
Sally’s Strudel is a located in a small town that has no other strudel producers. Market research indicates that the weekly inverse demand for a strudel would be P=8-(1/50)Qd , where P is price and QD is quantity demanded.
Because Sally’s Strudel is the only supplier, they will have a monopoly. The rent on Sally’s shop is $500 a week and this is a fixed cost. In addition, the production of each additional strudel costs Sally’s Strudel $1 to produce.
A) The total cost function for producing strudel, as a function of Q is: ______________________.
B) The marginal revenue curve as a function of Q, is: ________________________________________________.
C) The marginal cost of producing a strudel is:
D) Compute Sally’s Strudel’s profit maximizing output and price. What are her profits?
E) True/False, and explain using precise numbers: At the optimal level of output, the MR=P=MC for a monopolist.
F) What is the price elasticity of demand for Sally’s Strudel at the profit maximizing level of output?
-Is the price elasticity of demand elastic or inelastic?
-Could it ever be the opposite of what you said above?
G) The plaza where Sally’s Strudel is located is being renovated and rents are expected to increase. Assuming the demand for Sally’s Strudel doesn’t change with the renovation, and rent goes up by $500/week to $1000/week, will Sally’s Strudel stay in business in the short run and the long run? (Hint: Use your intuition here, you don’t need to do much more math – think about how the rent will affect their choices and profits). Include a discussion of the short run rule and profits.
|
When the federal government borrows money
: If one state is suffering from acid rain as a result of sulfur dioxide emissions from the industries in a neighboring state, then: When the federal government borrows money, the resulting ______ in interest rates will lead private investment to _____..
|
|
What is the most contractor can charge to pave the driveway
: Lane and Riley are the only two residents in a neighborhood, and they share the same driveway. They would like to have the driveway paved. The value of the paved driveway is $1,500 to Lane and $900 to Riley. Regardless of who pays for the paving both..
|
|
For fixed percent reduction in pollution emissions
: For a fixed percent reduction in pollution emissions to be economically efficient, it would have to be the case that
|
|
Time-inconsistency problem
: Describe the short run and long run equilibrium in a monopolistically competitive market. An open market purchase of securities will always cause the equilibrium Fed Funds rate to fall. The "time-inconsistency problem" is less likely to occur when th..
|
|
The marginal cost of producing strudel
: Sally’s Strudel is a located in a small town that has no other strudel producers. Market research indicates that the weekly inverse demand for a strudel would be P=8-(1/50)Qd , where P is price and QD is quantity demanded. The marginal cost of produc..
|
|
Monopoly causes dead weight loss
: We all know that monopoly causes dead weight loss; therefore monopoly means a loss for the society. Now, if a patent gives a firm monopoly power. why does the government give out patents? Explain.
|
|
What is the typical firm short-run supply curve
: Suppose there are 2000 identical firms producing pumpkins in a perfectly competitive market and that the total cost curve for each firm is given by TC= (1/2q^2+5q+20.5) and MC = q+5. What is the typical firm's short-run supply curve? Derive and graph..
|
|
What is price discrimination policy
: What is price discrimination and how is it used to increase a monopoly's profits? Explain with a graph, how consumer surplus changes when a monopoly price discriminates. Give me a real-world example where companies use price discrimination policy.
|
|
Holding the overall costs of production constant
: Consider the following scenario: the firm estimates that currently, its marginal product of labor is 80, while the marginal product of capital is 160. The firm pays $40 in the rental price of capital and $15 in wage. Can this firm improve its profits..
|