Question 6 P3 MC ATC P3 Xu f P2 P1 Quantity P2 Price P1 Price Q2 Q3 QW QXQX QZ more firms in the industry but lower levels of output for each firm. fewer firms in the market. SO a new long-run equilibrium at point X in panel (b). lower prices once the new long-run equilibrium is reached. DO D1 S1 Suppose that this market starts at price equal to P2 and quantity QZ. A decrease in demand will cause Quantity

Question 6 P3 MC ATC P3 Xu f P2 P1 Quantity P2 Price P1 Price Q2 Q3 QW QXQX QZ more firms in the industry but lower levels of output for each firm. fewer firms in the market. SO a new long-run equilibrium at point X in panel (b). lower prices once the new long-run equilibrium is reached. DO D1 S1 Suppose that this market starts at price equal to P2 and quantity QZ. A decrease in demand will cause Quantity

Managerial Economics: A Problem Solving Approach

5th Edition

ISBN:9781337106665

Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Chapter23: Managing Vertical Relationships

Section: Chapter Questions

Problem 1MC

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3. Technology for producing q gives rise to the cost function c(q) = aq+ bq². The market demand for q is p = a - Bq. (a) If a > 0, if b 0 and b 0 and b >0, what is the long run equilibrium market price and number of firms? Explain.
5. Consider a market where there are two mers with inverse demand func- consu tions p(q1) = 10 -91 and p(q2) = 5-92. (a) Suppose there is a single firm with inverse supply function p(q) = }q. Find the competitive equilibrium. (b) Find the elasticity of demand and supply at the equilibrium. (c) Suppose instead that there are three firms with the identical inverse sup- ply function given in part (a). Find the competitive equilibrium.
4.5 Show that the long-run equilibrium number of firms is indeterminate when all firms in the industryshare the same constant returns-to-scale technology and face the same factor prices.4.7 Technology for producing q gives rise to the cost function c(q) = aq + bg. The market demand forqisp =a - Bq.(a) If a>0, if b < 0, and if there are J firms in the industry, what is the short-run equilibriummarket price and the output of a representative firm?b) Ifa> 0 and b <0, what is the long-run equilibrium market price and number of firms? Explain.() Ifa>0and b > 0, what is the long-un equilibrium market price and number of firms? Explain.
Figure 14-7 Graph (a) Graph (b) MC ATC 1. D, Q, a, 0, 0: QUANTITY QUANTITY Refer to Figure 14-7. Assume that the market starts in equilibrium at point W in graph (b). An increase in demand from Do to Di will result in a new market equilibrium at point X. an eventual increase in the number of firms in the market and a new long-run equilibrium at point Z. rising prices and falling profits for existing firms in the market. falling prices and falling profits for existing firms in the market. PRICE PRICE
The Potomac Range Corporation manufactures a line of microwave ovens costing $500 each. Its sales have averaged about 6,000 units per month during the past year. In August, Potomacs closest competitor, Spring City Stove Works, cut its price for a closely competitive model from $600 to $450. Potomac noticed that its sales volume declined to 4,500 units per month after Spring City announced its price cut. What is the arc cross elasticity of demand between Potomacs oven and the competitive Spring City model? Would you say that these two firms are very dose competitors? What other factors could have influenced the observed relationship? If Potomac knows that the arc price elasticity of demand for its ovens is 3.0, what price would Potomac have to charge to sell the same number of units it did before the Spring City price cut?
Cost reduction and the Herfindahl and Lerner indexes. Consider an industry where demand has constant price elasticity and firms compete in output levels. In an initial equilibrium, both firms have the same marginal cost, c. Then Firm 1, by investing heavily in R&D, manages to reduce its marginal cost to c′ , c; a new equilibrium takes place. (a) What impact does the innovation have on the values of H and L? (b) What impact does the innovation have on consumer welfare? (c) What do the previous answers have to say about L as performance measure?
Hello! I just want to ask for help whether the answers in the given pictures are correct. If it's not, please help me correct and resolve it. Please refer to the given pictures below for the questions and answers. | After verifying the given answers shown in the subsequent picture, PLEASE ANSWER LETTER D. | D. At this equilibrium market price, calculate the level of output and profit that each firm produces in the short- run. With this information, comment on the potential entry/exit of firms in this industry in the long-run. | NOTE: Type only your answers. Please do not handwritten your answers.
7. A competitive firm participates in a market where market demand & supply are given by QD=85,000-5000P Qs = 40,000+ 2500 P Find the market equilibrium price. Plot a graph of the demand curve facing the firm. Given that the marginal cost curve of the firm is given by the following: MC = 2q, calculate the profit maximizing quantity that the firm will produce. Assume that FC=0. Calculate the profit of the firm at this quantity. a. b. C.
2. Suppose that a market consists of 650 idetical fims, all with the same cost curve: TC(q) = 325q² + 0.3. The market demand is given by Qd(p) = 50 – p (a) What is the equilibriun price and quantity? (b) What quantity must each firm produce and sell at equilibrium? (c) Do fims make positive profits in the market equilibrium? (d) Calculate consumers' surplus, producers' surplus and total surplus. (e) The government imposes a tax of 12 per unit of the product on the suppliers. What will be the new equilibrium price and quantity? (f) Do firms make positive profits at market equilibrium? (g) What will be the new consumes surplus, produces surplus and total surplus? (h) Calculate the value of the DWL imposed by the tax.
s 1, 12 & 13 Assignment Saved Help Save & Exit Assume a purely competitive increasing-cost industry is in long-run equilibrium. If a decline in demand occurs, firms will Multiple Choice leave the industry, price will fall, and quantity produced will rise. enter the industry and price and quantity will both rise. leave the industry and price and quantity will both rise. leave the industry, price will fall, and quantity produced will fall.
1.i) Assuming you are the managing director of a firm that produces goods: A,B and C .The price elasticity of demand for A is 1.2, for B it is 1.oo and C is 0.75. It is known that he's firm is experiencing serious cash flow problems and you have to increase total revenue as soon as possible. If you were in a position to set the prices for these goods, what would be your pricing strategy for each product ii) price falls from N$ 16 to N$ 12 per bottle and demand rises from 200 to 300 per bottle.calculate the PED using midpoint formula Output prices average (total)cost Total cost marginal cost Total profit/loss 10 10 -108 20 10 4 -48 30 10 5 3 40 10 6.20 40 50 10 8 60 60 10 10 60 2. i) fill in the gaps ii)in which market structure doess Johnson Electronics (Pty)Ltd operate? iii)what level of output maximizes the firms profit
P РА P3 P₂ P₁ a Multiple Choice MC O d. ATC 0 Q Refer to the diagram for a purely competitive producer. If product price is P3, AVC the firm will maximize profit at point d. the firm will earn an economic profit. economic profits will be zero. new firms will enter this industry.