Business Finance - Economics Assignment 4 Principles of Economics
Ch 7 Worksheet
Student’ name:
ID:
1-Market Structure
2- Market Power.
3- Pure competition
4- Long Run
5- Short Run
6- Price Setting
7- Price making
8- Degree of freedom
9- Price in Pure competition
2. Complete the table directly below by calculating marginal product and average product.
|
Inputs of Labor |
Total Product |
Marginal Product |
Average Product |
|
0 |
o |
|
|
|
1 |
25 |
|
|
|
2 |
44 |
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|
|
3 |
61 |
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|
|
4 |
75 |
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|
5 |
84 |
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|
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6 |
90 |
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|
|
7 |
93 |
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8 |
92 |
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3. Why is a firm in perfect competition a price taker?
4. In perfect competition, why is a firm’s marginal revenue curve also the demand curve for the firm’s output?
5. What is the lowest price at which a firm produces an output? Explain why.
6. Why does a firm in perfect competition produce the quantity at which marginal cost equals price?
7. Explain why resources are used efficiently in a competitive market.
8. Pat’s Pizza Kitchen is a price taker. Its costs are in the table.
a. Calculate Pat’s profit-maximizing output and economic profit if the market price is
(i) $14 a pizza.
(ii) $12 a pizza.
(iii) $10 a pizza.
Output (pizzas per hour) Total cost (dollars per hour
0 10
1 21
2 30
3 41
4 54
5 69
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Quantity, |
Total cost, |
Fixed cost, |
Variable cost, |
Total revenue, |
Profit |
|
0 |
$62 |
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|
|
|
|
10 |
$90 |
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20 |
$110 |
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|
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30 |
$126 |
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40 |
$144 |
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50 |
$166 |
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60 |
$192 |
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|
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70 |
$224 |
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|
|
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|
80 |
$264 |
|
|
|
|
|
90 |
$324 |
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|
100 |
$404 |
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Selling price is $4.00
Problem: 1
A competitive firm's short-run cost information is shown in the table below.
|
Output |
Fixed Cost |
Variable Cost |
Total Cost |
|
0 |
$9.00 |
$ 0.00 |
$ 9.00 |
|
1 |
9.00 |
8.00 |
17.00 |
|
2 |
9.00 |
15.00 |
24.00 |
|
3 |
9.00 |
21.00 |
30.00 |
|
4 |
9.00 |
26.00 |
35.00 |
|
5 |
9.00 |
32.00 |
41.00 |
|
6 |
9.00 |
39.00 |
48.00 |
|
7 |
9.00 |
47.00 |
56.00 |
|
8 |
9.00 |
56.00 |
65.00 |
|
9 |
9.00 |
66.00 |
75.00 |
|
10 |
9.00 |
77.00 |
86.00 |
a. Suppose the firm can sell all the output it desires at the market price of $9.10. Compute the firm's total revenue and its total profit (loss) for the potential output choices shown in the table. What output level maximizes the firm's profits (or minimizes its losses)?
b. Repeat part a. assuming the price has fallen t
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Problem 02 - Profit maximization: MR = MC approach
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Problem: Suppose a competitive firm's cost information is as shown in the table below. Its total fixed cost is $9.00.
a. Suppose the firm sells its output at a price of $9.10. What is the firm's marginal revenue (MR)? b. Compare MR to marginal cost (MC) to determine the firm's profit maximizing (loss-minimizing) output level. Be sure to check whether or not the firm should shut down. c. What is the firm's per-unit profit (loss) at this output level? d. What is the firm's total profit (loss) at this output level? e. Repeat parts a. through d. assuming the price has fallen to $7.10. f. Repeat again assuming the price has fallen to $6.10
Ch 8- Problem 1 - Monopoly price and output
Problem .2 - Price discrimination
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