N5 Questions 12 and 13Firms and markets often co-exist. By interacting in a market, a firm can increase its profit comparedto only conducting internal transactions. Figure 1. provided in the answer booklet, illustrates thesituation for a firm with two divisions. The firm's upstream division incurs a marginal cost MCywhen producing some good that can be used as an input by the downstream division. The upstreamdivision can also sell its production in an external market. The firm's downstream division has amarginal revenue MR, when selling to end-consumers. This downstream division can purchase itsinput requirement from the upstream division and suppliers in the external market. The marketprice is P.12) Illustrate in Figure I the firm's profit when its divisions are allowed to buy and sell in theexternal market.13) Illustrate in Figure 2 the firm's profit when its divisions are allowed to buy and sell in theexternal market.Question 12Question 13Figure IFigure 2QuantityQuantityVAShapeCanvasLayoutEditBackground

Lets assume that the market is perfectly competitive and when demand is equal to supply, then in a…

Answered: 12) Illustrate in Figure 1 the firm's…

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter9: Monopoly

Section: Chapter Questions

Problem 31P: Return to Figure 9.2. Suppose P0 is 10 and P1 is 11. Suppose a new firm with the same LRAC curve as...

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A study of ethanol as a transportation fuel reveals that the competitive equilibrium is expected to be at a price of $4 per gallon and a consumption rate of 100 million gallons/day. For a production rate of 10 million gallons/day, the marginal cost is found to be $1 per gallon. Also, a a price of $10 per gallon the demand is 10 million gallons/day. Answer the following questions for this system. 1. Determine the equations for the demand and marginal cost lines. 2. Calculate the consumer and producer surplus for the market equilibrium. 3. It was discovered later that the above information ignored a government subsidy of 50 cents per gallon. How will the demand and marginal cost lines, and the competitive equilibrium, change if this subsidy is removed?
The following graph depicts the costs incurred by a Local egg seller, Rahim. Rahim is faced with strong competitors who are selling exactly the same product. Use the graph to answer the following questions- Price/Cost per egg MC 12 ATC 8 MR3 AVC 6. MR2 MR1 Quantity 100 200 300 400 a)At what price will Rahim try to minimize loss by selling eggs in the market? b)At what price will there be a break-even point?
Rubidoux Adventures supplies professional guides for climbs up Mt. Rubidoux. The company has two guides, Rocky and Cliff. Because Mt. Rubidoux is a pretty easy climb, the company has only two customers, Ken and Lucy. The table below shows the guides' marginal costs for each climb as well as the customers' MWTP for guided climbs. Use this table to answer the questions that follow. Assume that only whole climbs are available. MCRocky (S/climb) Climbs MCClff MWTPKen MWTPLucy (S/climb) (S/climb) (S/climb) 1 4 1 24 22 2 6. 23 21 3 7 4. 21 18 4 11 7 19 16 13 9 17 11 16 12 14 8 7 19 14 11 6 21 16 9 3 What is Ken's reservation price? O a. 22 Ob. 23 OC 24 O d. 21
A large share of the world supply of diamondscomes from Russia and South Africa. Suppose thatthe marginal cost of mining diamonds is constant at$1,000 per diamond and the demand for diamonds isdescribed by the following schedule:Price Quantity$8,000 5,000 diamonds7,000 6,0006,000 7,0005,000 8,0004,000 9,0003,000 10,0002,000 11,0001,000 12,000a. If there were many suppliers of diamonds, whatwould be the price and quantity?b. If there were only one supplier of diamonds, whatwould be the price and quantity?c. If Russia and South Africa formed a cartel, whatwould be the price and quantity? If the countriessplit the market evenly, what would be SouthAfrica’s production and profit? What wouldhappen to South Africa’s profit if it increased itsproduction by 1,000 while Russia stuck to thecartel agreement?d. Use your answers to part (c) to explain why cartelagreements are often not successful.
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The following graph depicts the costs incurred by a Local egg seller, Rahim. Rahim is faced with strong competitors who are selling exactly the same product. Use the graph to answer the following questions- Price/Cost per egg MC 12 ATC MR3 AVC MR2 MR1 Quantity 100 200 300 400 a)lf the market price per egg is 8tk, in order to maximize profit how many eggs does Rahim sell? b)lf the price stays at 8tk, what happens in the long run? choose from the following options. option 1: Rahim stops selling eggs. option 2 : New firms enter into the egg market option 3: all existing sellers suffer from an economic loss. c)lf the price falls down to 3tk price, which of the following option does Rahim have in short run? option1: Temporarily shutting down the business business option 2 : staying in generating no profit option 3: indifferent between staying in and going Out of the market. but
Table 2 Imagine a small town in which only two residents, Lisa and Mark, own wells that produce sa drinking water. Each week Lisa and Mark work together to decide how many gallons of water to pump. They bring the water to town and sell it at whatever price the Time left 1:5 bear. To keep things simple, suppose that Lisa and Mark can pump as much water as they want without cost so that the marginal cost of water equals zero. The weekly town demand schedule and total revenue schedule for water is shown in the table below: Quantity (in gallons) 0 100 200 300 400 500 600 700 800 900 1,000 1,100 1,200 Select one: Price O a. $60 O b. $20 O c. $40 O d. $70 $120 110 100 90 80 70 60 50 40 30 20 10 0 Refer to Table 2. If Lisa and Mark operate as a profit-maximizing monopoly in the market for water, what price will they charge? Total Revenue (and Total Profit) $0 11,000 20,000 27,000 32,000 35,000 36,000 35,000 32,000 27,000 20,000 11,000 0
Alex Anna Open Sans,s... v √¶" S 10pt Table 3: Maximum Price Ⓒ Refer to table 3. Suppose the restaurant engages in mixed bundling and charges $3 for a bundle, $2.52 for chicken nuggets, and $1.5 for fires. The restaurant's cost to produce chicken nuggets is $1, and the cost to product fries is $0.5. Show that the profit obtained under mixed bundling will be higher than that under pure bundling. For the toolbar, press ALT+F10 (PC) or ALT+FN+F10 (Mac). BI U Paragraph > ¶< Chicken Nuggets E $2.50 $2.55 田田田 Ix X XQ Fries 由用网 $0.5 $1.0 Q== < 0) Ⓒ 23 + X² X₂
Return to Figure 9.2. Suppose P0 is $10 and P1 is$11. Suppose a new firm with the same LRAC curve asthe incumbent tries to break into the market by selling4,000 units of output. Estimate from the graph what thenew firm’s average cost of producing output would be.If the incumbent continues to produce 6,000 units, howmuch output would the two firms supply to the market?Estimate what would happen to the market price as aresult of the supply of both the incumbent firm andthe new entrant. Approximately how much profit wouldeach firm earn?
6 If it was possible for one company to gain ownership control of all uranium processing plants in the United States, then what would be the likely result? The factors of market demand and supply would set the price. BO The company would strive to reach efficiencies only they know how to achieve. CO The company would set up barriers to entry to discourage competition. DO The government would initiate deregulation to ensure the company's monopoly.
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12) Illustrate in Figure 1 the firm's profit when its divisions are allowed to buy and sell in the external market. 13) Illustrate in Figure 2 the firm's profit when its divisions are allowed to buy and sell in the external market.