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ECON HOMEWORK 3

# ECON HOMEWORK 3 - 4,000 P 4,000P 510,000 =...

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SPRING 2008 ECON 120 HOMEWORK 4. PERFECT COMPETITION. DUE ON MONDAY, MARCH 31/08 TYPE AND STAPLE YOUR HOMEWORK (Calculations and graphs can be hand-written) 1. Complete the following table. 2. Based on the table below, what is the optimal level of production of the firm if the price is \$31? Calculate the profit. AVERAGE AVERAGE AVERAGE FIXED VARIABLE TOTAL MARGINAL FIXED VARIABLE TOTAL Q COST COST COST COST COST COST COST 0 0 1 165 165.00 2 27 155-27= 128 3 35 190-35=155 50.00 4 190 5 7 6 9.33 7 13 8 87 9 28.78 10 28 11 319 31 12 205 13 40 14 31.43 15 50 3. Assume the following information: MARKET: Qd = 500,000 – 4,000P, Qs = -10,000 + 8,000P FIRM: Total cost = TC =100 + 2 q + 0.8 q 2 Marginal Cost = MC = 2 + 1.6 q

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Q: Quantity of the market q: Quantity produced by the firm a. Calculate the optimal level of production of the firm Market Price : 500,000 – 4000P = -10,000 +8,000 P +10,000 +10,000 510,000 – 4,000P = 8,000P
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Unformatted text preview: + 4,000 P +4,000P 510,000 = 12,000P /12,000 /12,000 42.5 = Price 42.5 = 2 + 1.6 q-2 -2 40.5= 1.6q Profit is maximized when production is at 25.312 b. Calculate the total profit of the firm Profit = Price- ATC Profit = 42.5 - c. How much is the fixed cost of the firm? 4. Assume that the market demand from the previous problem decreases by 300,000 units. a. Assuming the same Qs equation, calculate the new market price b. Using the same information for the firm (TC and MC equations), calculate the optimal level of production of the firm and its profit c. Firms should keep producing, even if the have a negative profit, if their variable costs are greater than their revenue. According to this, should this firm keep producing or should it shut down?...
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ECON HOMEWORK 3 - 4,000 P 4,000P 510,000 =...

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