Micro Ch13-17 ICA Review
2
Name __ Economics ± Dr. Sauer Ch 13-17 Review 1. Complete the following table displaying a firm¶s cost structure. Quantity TC TVC TFC MC 0 1 $1 $1 2 $3 $10 3 $16 $6 4 $10 $4 5 $25 6 $15 2. Suppose a f irm in a perf ectly competitive market can maximize its prof its by producing 10 units o f output. Suppos e at 10 units of output that marginal revenue is $8.00. What would be the firm¶s total revenue when it produces 6 units of output? 3. Professor Farnsworth is a scientist who quits his job as head of the company ³Plan et Express´ to start his own consulting business . His sala ry at Planet Exp ress was $50,000 a y ear. As a consult ant, he does n¶t need to buy any equipment or supplies and he charges $100 an hour to clients. He billed 400 hours last year. a. Write the formula for, and calculate accounting profit. b. Write the formula for, and calculate economic profit. 4. This graph depicts a monopolist. MR Demand MC 18 12 4 8 12 16 20 24 28 32 Q 8 16 24 32 P a. What is the prof it-maximizing lev el of output? b. What price will the firm charge? c. What is the socially optimal level of output? d. What is the socially optimal price? e. Calculate the deadweight loss.
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Transcript of Micro Ch13-17 ICA Review
8/3/2019 Micro Ch13-17 ICA Review
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Name ___________________________________________________ Economics ± Dr. Sauer Ch 13-17 Review
1. Complete the following table displaying a firm¶s cost structure.
Quantity TC TVC TFC MC01 $1 $12 $3 $103 $16 $64 $10 $45 $256 $15
2. Suppose a firm in a perfectly competitive market can maximize its profits by producing 10 units of output. Suppose at 10units of output that marginal revenue is $8.00. What would be the firm¶s total revenue when it produces 6 units of output?
3. Professor Farnsworth is a scientist who quits his job as head of the company ³Planet Express´ to start his ownconsulting business. His salary at Planet Express was $50,000 a year. As a consultant, he doesn¶t need to buy anyequipment or supplies and he charges $100 an hour to clients. He billed 400 hours last year.
a. Write the formula for, and calculate accounting profit.
b. Write the formula for, and calculate economic profit.
4. This graph depicts a monopolist.
MR
Demand
MC
18
12
4 8 12 16 20 24 28 32 Q
8
16
24
32 P
a. What is the profit-maximizing level of output?
b. What price will the firm charge?
c. What is the socially optimal level of output?
d. What is the socially optimal price?
e. Calculate the deadweight loss.
8/3/2019 Micro Ch13-17 ICA Review
http://slidepdf.com/reader/full/micro-ch13-17-ica-review 2/2
5. The following information is for a monopolistic competitor.
a. Complete the table.
Price Quantity TR MR MC9 4 58 6 27 8 46 10 55 12 6
b. What rule does the firm use to find the profit-maximizing level of output?
c. What are the firm¶s profit-maximizing quantity and price?
d. Suppose that at the profit maximizing level of output, the AVC = $2 and the ATC = $8. Calculate this firm¶s profit or loss.
e. Given your answer from part ³d´, what will happen in this industry in the long run? Explain why.
6. Graph a perfectly competitive firm at the shutdown point. On your graph, also illustrate this firm¶s profits or losses.
7. Ford and General Motors are considering expanding into the Vietnamese automobile market. The following payoff matrix
illustrates their additional profits from expanding or not. Solve for all Nash Equilbria. Is this a Prisoners¶ Dilemma?
GM
Expand Don¶t Expand
Ford Expand 2, 2 4, 1 Don¶t Expand 1, 4 3, 3
