PS_CH08 - ECON 2296 - Practice Questions Chapter 8 1) The...

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ECON 2296 - Practice Questions Chapter 8 1) The following table contains information for a price taking competitive firm. Complete the table and determine the profit maximizing level of output (round your answer to the nearest whole number). Output TC MC FC AC TR AR MR 0 5 0 1 7 10 2 11 20 3 17 30 4 27 40 5 41 50 6 61 60 2) Conigan Box Company produces cardboard boxes that are sold in bundles of 1000 boxes. The market is highly competitive, with boxes currently selling for $100 per thousand. Conigan's total cost curve is given by the equation TC = 3,000,000 + 0.001Q 2 , where Q is measured in thousand box bundles per year. a) Calculate Conigan's profit maximizing quantity. Is the firm earning a profit? b) Analyze Conigan's position in terms of the shutdown condition. Should Conigan operate or shut down in the shortrun? 3) The table below lists the short-run costs for One Guy's Pizza. If One Guy's can sell all the output they produce for $12 per unit, how much should One Guy's produce to maximize profits? Does One Guy's Pizza earn an economic profit in the short-run? Q TFC TVC ATC AVC MC Profits 58 100 336.4 59 100 348.1 60 100 360 61 100 372.1 4) Laura's internet services has the following short-run cost curve: where q is Laura's output level, K is the number of servers she leases and r is the lease rate of servers. Currently, Laura leases 8 servers, the lease rate of servers is $15, and Laura can sell all the output she produces for $500. Find Laura's short-run profit maximizing level of output. Calculate Laura's profits. If the lease rate of internet servers rises to $20, how does Laura's optimal output and profits change? 5) The market demand for a type of carpet known as KP-7 has been estimated as:
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P = 40 - 0.25Q, where P is price ($/yard) and Q is rate of sales (hundreds of yards per month). The market supply is expressed as: P = 5.0 + 0.05Q. A typical firm in this market has a total cost function given as: C = 100 - 20.0q + 2.0q 2 . a) Determine the equilibrium market output rate and price. b) Determine the output rate for a typical firm. c) Determine the rate of profit (or loss) earned by the typical firm. 6) The market for wheat consists of 500 identical firms, each with the total cost function shown: TC = 90,000 + 0.00001Q 2 where Q is measured in bushels per year. The market demand curve for wheat is Q = 90,000,000 - 20,000,000P, where Q is again measured in bushels and P is the price per bushel. a) Determine the short-run equilibrium price and quantity that would exist in the market. b) Calculate the profit maximizing quantity for the individual firm. Calculate the firm's short-run profit (loss) at that quantity. c) Assume that the short-run profit or loss is representative of the current long-run prospects in this market.
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PS_CH08 - ECON 2296 - Practice Questions Chapter 8 1) The...

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