Calculate economic profit, Financial Accounting

Assignment Help:

Calculate Economic profit:

Suppose a monopolistically competitive firm is facing the following demand and cost information.

2240_Economic profit earned.png

a.  If the firm is a profit maximizer, how many units of output should the firm produce?  How did you find this number?  Explain.

b.  What price should the firm charge?  Why? Explain.

c.  What is the amount of economic profit (or economic loss) earned (or incurred) by the firm?

d.  What do you predict will happen in the long-run?  Why? 
 
2.  Your friend Mike owns a coffee shop in a town with many competing coffee shops in a monopolistically competitive industry.  One day Mike tells you (a trained economist) that he is earning an economic profit and is currently setting his price equal to his marginal cost.  Is Mike producing the profit-maximizing amount of coffee?   If not, what should he do?  Explain.  What will be effect of that proposed course of action?
 
3.  Your friend Alberta is the owner of a boutique clothing store in a monopolistically competitive clothing market, so Alberta's store has some degree of market power. Assume further that the market is in long-run equilibrium. Over coffee, Alberta tells you that she is considering raising the price of her clothing to increase her profits. What is your advice?


Related Discussions:- Calculate economic profit

How the following situations should be reported, You have just started work...

You have just started work for Warren Co. as part of the controller's group involved in current financial reporting problems. Jane Henshaw, controller for Warren, is interested in

Americans with disabilities act - ada, Americans With Disabilities Act - AD...

Americans With Disabilities Act - ADA  legislation passed in 1990 that bans discrimination against people who are having disabilities. According to this Act, discrimination against

Situational Decsisions, Your Company makes 42,000 units per year of a part ...

Your Company makes 42,000 units per year of a part it uses in the products it manufactures. The unit product cost of this part is computed as follows: Direct material $15.00 Direc

Illustration regarding profit that head office can claim, Illustration rega...

Illustration regarding profit that head office can claim E Ltd sets up a branch in Nyeri on 1 July 2001. Goods are sent to branch at an invoice price which is 10% above cost. S

Break-even point, am trying to figure out the break-even point in units usi...

am trying to figure out the break-even point in units using the mathmatical equation. the numbers i have are unit selling price $520, the variable costs per unit are $312 and fina

Prepare a bank reconciliation for the month of october, The John Company ma...

The John Company maintains a checking account at the Bank of the Cumberland. The bank provides a bank statement along with canceled checks on the last day of each month. The Octobe

Control deficiency, Significant Deficiency -Control deficiency or combinat...

Significant Deficiency -Control deficiency or combination of control deficiencies, which adversely affects company's ability to authorize, initiate, process, record or report exte

Operating and capital leases, In 200 words or more, discuss the issues that...

In 200 words or more, discuss the issues that relate to the accounting for operating and capital leases. In your posting, please articulate issues that the accountant faces in r

Stock transactions, Brazil Corporation was organized on January 1, 1999. It...

Brazil Corporation was organized on January 1, 1999. It is authorized to issue 20,000 shares of 6%, $50 par value preferred stock, and 500,000 shares of common stock with a par val

ACCOUNTING THEORY AND PRACTICE, EXPLIN THE PROCEDURE FOLLOWED IN GOVERMENT ...

EXPLIN THE PROCEDURE FOLLOWED IN GOVERMENT SYSTEM OF ACCOUNTING IN INDIA.

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd