Reference no: EM132154175
Assignment -
1. Identify the four basic market structures based on some important basic characteristics.
2. Assume that the following data is for a profit-maximizing manufacturer:
|
Quantity
|
$ Total Cost
|
|
0
|
100
|
|
1
|
140
|
|
2
|
160
|
|
3
|
190
|
|
4
|
240
|
|
5
|
300
|
|
6
|
370
|
|
7
|
450
|
|
8
|
550
|
a. Does this manufacturer operate in the short-run or in the long-run? Explain.
b. If this manufacturer shuts down what would be the profit or loss?
c. If the price is $75 per unit, what are the profit maximizing output and the level of profit or loss?
d. If the price is $55 per unit, what are the profit maximizing output and the level of profit or loss?
e. What is the value of the break-even price?
3. Use a graph to demonstrate the circumstances that would prevail in a perfectly competitive market where firms are experiencing economic losses. Identify costs, revenue, and the economic losses on your graph. Using your graph, determine whether this firm will shut down in the short run, or choose to remain in the market. Explain your answer.
4. Use a graph to demonstrate the circumstances that would prevail in a competitive market where firms are earning economic profits. 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 1000 units. What is the firm's current profit? Can this profit be maintained in the long run? Carefully explain your answer.