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test economics - Chapter 5 Chapter 8 Time Remaining 1(TCO A...

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Chapter 5
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Chapter 8
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Time Remaining: 1. (TCO A) Suppose you are hired to manage a small manufacturing facility that produces Widgets. (a.) (15 points) You know from data collected on the Widget Market that market demand has recently decreased and market supply has recently increased. As manager of the facility, what decisions should you make regarding production levels and pricing for your Widget facility? Remember that supply and demand are about the market supply and market demand, which is bigger than your own company. You are being given data on supply and demand for the whole market and are being asked what effect that has on you as a small part of that market. (b.) (15 points) Now, suppose that following the supply and demand changes in (a), a substitute good goes down in price, and your costs of production decrease. What new decisions will you make regarding production levels and pricing for your Widget facility? (Points: 30) 2. (TCO B) Here is some data on the demand for marshmallows: Price Quantity $10 100 $ 8 300 $ 6 700 $ 4 1300 $ 2 2200 (a.) (15 points) Is demand elastic or inelastic in the $6-$8 price range? How do you know? (b.) (15 points) If the table represents the demand faced by a monopoly firm, then what is that firm’s marginal revenue as it increases output from 1300 units to 2200 units? Show all work. (Be careful here!) (Points: 30) 3. (TCO C) You have been hired to manage a small manufacturing facility whose cost and production data are given in the table below.
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