ECON HOMEWORK 3

ECON HOMEWORK 3 - + 4,000 P +4,000P 510,000 = 12,000P...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
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 + 0.8q 2 Marginal Cost = MC = 2 + 1.6 q
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
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
Background image of page 2
This is the end of the preview. Sign up to access the rest of the document.

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?...
View Full Document

This note was uploaded on 04/08/2008 for the course ECON 120 taught by Professor Serpa during the Spring '08 term at Ill. Chicago.

Page1 / 2

ECON HOMEWORK 3 - + 4,000 P +4,000P 510,000 = 12,000P...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online