Economics (Irwin Economics)
21st Edition
ISBN: 9781259723223
Author: Campbell R. McConnell, Stanley L. Brue, Sean Masaki Flynn Dr.
Publisher: McGraw-Hill Education
expand_more
expand_more
format_list_bulleted
Question
Chapter 2, Problem 6DQ
Subpart (a):
To determine
Profit and loss system in the market system and disciplinarian of the market economy.
Subpart (b):
To determine
Profit and loss system in the market system and disciplinarian of the market economy.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solutionStudents have asked these similar questions
250
225
Revenue Lost
200
175
150
Revenue Gained
125
Demand
100
75
50
25
3
4
7
8
9.
10
QUANTITY (Fire engines)
Gilberto
increase production from 7 to 8 fire engines because the
dominates in this scenario.
True or False: If Gilberto's Fire Engines were a competitive firm instead and $100,000 were the market price for an engine, decreasing its price from
$100,000 to $50,000 would result in the same change in the production quantity and, thus, total revenue.
O True
O False
acer
Σ
2.
1.
PRICE (Thousands of dollars per fire engine)
1. Rio live in a town with 300 adults and 200 children, and he is thinking about putting
on a play to entertain your neighbors and make some money. A play has a fixed cost
of $2,000 except all cost like maintenance costs until two years, but selling an extra
ticket has zero marginal cost. Here are the demand schedules for his two types of
customer:
Price
Adults
Children
$10
9
100
8
200
7
300
6
300
300
100
4
300
200
300
200
300
200
1
300
200
300
200
a. To maximize profit, what price would he charge for an adult ticket? For a child's
ticket? How much the profit? (Hint: total cost for this year include fixed cost)
b. Suppose in this year, the city council passes a law prohibiting him from charging
different prices to different customers. What price does he set for a ticket now?
How much profit now? (Hint: when quantity of produced yield maximum revenue
or the sum of these both revenues sastify)
Firms must typically purchase inputs from suppliers to produce output.
What effect might suppliers have on an industry?
O A. If an input is specialized, then the supplier is likely to have the bargaining power to limit a firm's profits.
O B. Suppliers cannot affect output markets, although an output market with only a few firms is likely to have the bargaining power to limit a supplier's profits.
Oc. If many firms can supply an input, then suppliers are likely to have the bargaining power to limit a firm's profits.
O D. If only a few firms can supply an input, then markets will likely experience shortages because firms are unable to produce sufficient output.
O E. If suppliers are price takers, then a firm will likely be a price taker with no ability to raise price.
Chapter 2 Solutions
Economics (Irwin Economics)
Ch. 2.2 - Prob. 1QQCh. 2.2 - Prob. 2QQCh. 2.2 - Prob. 3QQCh. 2.2 - Prob. 4QQCh. 2 - Prob. 1DQCh. 2 - Prob. 2DQCh. 2 - Prob. 3DQCh. 2 - Prob. 4DQCh. 2 - Prob. 5DQCh. 2 - Prob. 6DQ
Ch. 2 - Prob. 7DQCh. 2 - Prob. 8DQCh. 2 - Prob. 9DQCh. 2 - Prob. 10DQCh. 2 - Prob. 11DQCh. 2 - Prob. 12DQCh. 2 - Prob. 13DQCh. 2 - Prob. 1RQCh. 2 - Prob. 2RQCh. 2 - Prob. 3RQCh. 2 - Prob. 4RQCh. 2 - Prob. 5RQCh. 2 - Prob. 6RQCh. 2 - Prob. 7RQCh. 2 - Prob. 8RQCh. 2 - Prob. 1PCh. 2 - Prob. 2PCh. 2 - Prob. 3PCh. 2 - Prob. 4P
Knowledge Booster
Similar questions
- 4. Firm A and firm B must decide whether to sell product X at a sales or a regular price. If both firms sell the product at a sales price, both firms earn a profit of 5. If both firms sell the product at the regular price, each firm earns a profit of 20. If firm B charges the regular price while firm A charges the sales price, firm A earns a profit of 60 while firm B has a loss of 15. If firm A charges the regular price while firm B charges a sales price, firm B earns a profit of 60 while firm A has a loss of 15. (a) Use the information to construct a payoff matrix for firms A and B. (b) Does firm A have a dominant strategy? (c) Does firm B have a dominant strategy? (d) What is the Nash Equilibrium for this game? Explain your answers.arrow_forward1. Rio live in a town with 300 adults and 200 children, and he is thinking about putting on a play to entertain your neighbors and make some money. A play has a fixed cost of $2,000 except all cost like maintenance costs until two years, but selling an extra ticket has zero marginal cost. Here are the demand schedules for his two types of customer: Price Adults Children $10 9. 100 8 200 7 300 300 300 100 4 300 200 300 200 300 200 1 300 200 300 200 c. Suppose next year government imposes tax equals $4 for selling an every extra ticket, what price would he charge for an adult ticket? For a child's ticket? How much the profit? Assume the law prohibiting him from charging different prices to different customers doesn't exist. (Hint: fixed cost doesn't include)arrow_forwardThe bread market, which is not differentiated, is characterized by many buyers and sellers. Identify the correct demand curve for this market Panel A Panel B D Units of output Units of output Panel C Panel D D D Units of output Units of output O a. Panel B O b. Panel D O c. PanelA O d. Panel C Price per unit of output ($) Price per unit of output ($) Price per unit of output ($) Price per unit of output ($)arrow_forward
- Consider a market demand function P=100-0.01Q. There are only two firms in the market and each firm's total cost function is 40g to produce identical products. Suppose Firm 1 is the first mover (leader) and Firm 2 is the follower. How much "more profits" can be achieved by the first mover compared to the Cournot model case (i.e., no first-mover effects)? O 1000 2000 O 3000 O 4000 O 5000arrow_forwardAssume there are two firms, firm A and B, engaged in Cournot competition. The industry demand curve is given by P = 60-Q, where Q = QA+QB denotes industry output. Each firm faces a marginal cost of production equal to $30. In equilibrium, what will be the output level of firm A? O O O O 10 20 30 40arrow_forwardCOURSE: MICROECONOMICS - Bertrand's ModelAssume that a market is supplied by 2 companies, whose total costs are: CTi = 100Respective demand of each is: q1 = 120 - 2p1 + p2 and q2 = 120 - 2p2 + p1It is requested to:(a) calculate the firms' profit and reaction function.(b) plot the market equilibrium price and reaction function(d) calculate equilibrium quantity produced by each firm(e) determine profits that both firms will have at equilibrium.arrow_forward
- Paolo's Fire Engines is the sole seller of fire engines in the fictional country of Pyrotania. Initially, Paolo produced eight fire engines, but he has decided to increase production to nine fire engines. The following graph shows the demand curve Paolo faces. As you can see, to sell the additional engine, Paolo must lower his price from $75,000 to $50,000 per fire engine. Note that while Paolo gains revenue from the additional engine he sells, he also loses revenue from the initial eight engines because he sells them all at the lower price. Use the purple rectangle (diamond symbols) to shade the area representing the revenue lost from the initial eight engines by selling at $50,000 rather than $75,000. Then use the green rectangle (triangle symbols) to shade the area representing the revenue gained from selling an additional engine at $50,000. PRICE (Thousands of dollars per fire engine) 250 225 200 175 150 125 100 75 50 25 thinin 0 3 4 5 6 7 QUANTITY (Fire engines) a Demand Revenue…arrow_forwardFill in the columns in the following table. (Enter your responses as whole numbers.) TFC TVC $5 $0 5 3 q 0 1 2 3 4 5 5 5 5 5 5 5 9 16 25 36 ԼՈ MC P = MR $5 5 5 5 S LO 5 40 5 5 TR $0 TC $5 Profit $-5arrow_forward3. In Kingston, a certain market is served by the firms Attila and Bando. They have constant average costs of $20 per unit. The firms can choose either a high price ($100) or a low price ($50) for their output. When both firms set a high price, total demand is 10,000 units which is split evenly between the two firms. When both set a low price, total demand is 18,000, which is again split evenly. If one firm sets a low price and the second a high price, the low priced firm sells 15,000 units while the high priced firm sells only 2,000 units. Analyze the pricing decisions of the two firms as a non-cooperative game. (a) Construct the payoff matrix for this game, where the payoffs are the two firms' profits in thousands of dollars. (b) Find the Nash equilibrium in pure strategies. Is this a dominant strategy equilibrium? Explain. (c) Explain why this is an example of the Prisoners' Dilemma game.arrow_forward
- Now assume that both firms are in the market and they choose quantities to supply. Assume also that, in equilibrium, firm 1 supplies 1/4 of the market, while firm 2 supplies the remaining 3/4. Then, in equilibrium, Question 2 options: Firm 1 charges a larger (percentage) mark-up over its costs than firm 2. Firm 1's mark-up is smaller than the mark-up it would charge if it was a monopoly. Firm 1 charges a smaller (percentage) mark-up over its costs than firm 2. However, Firm 1's mark-up is larger than the mark-up it would charge if it was a monopoly. Firm 1 charges a larger (percentage) mark-up over its costs than firm 2. Firm 1's mark-up is larger than the mark-up it would charge if it was a monopoly. Firm 1 and Firm 2 charge the same mark-up (in percent). This mark-up is smaller than the mark-up they would charge as monopolists. Firm 1 and Firm 2 charge the same mark-up (in percent).…arrow_forwardRaphael's Fire Engines is the sole seller of fire engines in the fictional country of Pyrotania. Initially, Raphael produced eight fire engines, but he has decided to increase production to nine fire engines. The following graph shows the demand curve Raphael faces. As you can see, to sell the additional engine, Raphael must lower his price from $80,000 to $40,000 per fire engine. Note that while Raphael gains revenue from the additional engine he sells, he also loses revenue from the initial eight engines because he sells them all at the lower price. Use the purple rectangle (diamond symbols) to shade the area representing the revenue lost from the initial eight engines by selling at $40,000 rather than $80,000. Then use the green rectangle (triangle symbols) to shade the area representing the revenue gained from selling an additional engine at $40,000. 200 180 160 Revenue Lost 140 120 Revenue Gained 100 80 Demand 60 40 20 2 3 4. 6. 7 8 9 10 QUANTITY (Fire engines) PRICE (Thousands of…arrow_forwardSuppose the capacity of the Salt Lake City Bees stadium is 25,000 seats. What is the profit maximizing price of a ticket? (Assume capacity constraints hold and that marginal cost is zero up to the capacity of the stadium.) O $60 O $50 O $40 O $10arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you