Ch. 9 End Problems

# Ch. 9 End Problems - chapter 9 > Perfect Competition and...

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>> Perfect Competition and the Supply Curve chapter 9 1. For each of the following, is the business a price-taking producer? Explain your answers. a. A cappuccino café in a university town where there are dozens of very similar cappucci- no cafés b. The makers of Pepsi-Cola c. One of many sellers of zucchini at a local farmers’ market 2. For each of the following, is the industry perfectly competitive? Referring to market share, standardization of the product, and/or free entry and exit, explain your answers. a. Aspirin Shania Twain concerts c. SUVs 3. Kate’s Katering provides catered meals, and the catered meals industry is perfectly compet- itive. Kate’s machinery costs \$100 per day and is the only fixed input. Her variable cost is comprised of the wages paid to the cooks and the food ingredients. The variable cost asso- ciated with each level of output is given in the accompanying table. PROBLEMS

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a. Calculate the total cost, the average variable cost, the average total cost, and the mar- ginal cost for each quantity of output. b. What is the break-even price? What is the shut-down price? c. Suppose that the price at which Kate can sell catered meals is \$21 per meal. In the short run, will Kate earn a profit? In the short run, should she produce or shut down? d. Suppose that the price at which Kate can sell catered meals is \$17 per meal. In the short run, will Kate earn a profit? In the short run, should she produce or shut down? e. Suppose that the price at which Kate can sell catered meals is \$13 per meal. In the short run, will Kate earn a profit? In the short run, should she produce or shut down? 4. Bob produces DVD movies for sale, which requires only a building and a machine that copies the original movie onto a CD. Bob rents a building for \$30,000 per month and rents a machine for \$20,000 a month. Those are his fixed costs. His variable cost is given in the
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## This note was uploaded on 04/13/2010 for the course ECON 1110 taught by Professor Wissink during the Fall '06 term at Cornell.

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Ch. 9 End Problems - chapter 9 > Perfect Competition and...

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