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Empirical & Short Answer Answer 5 out of 7 1. Short-run Firm Supply. Produce Pride, Inc., supplies sweet corn to canneries located throughout...

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Empirical & Short Answer Answer 5 out of 7 1. Short-run Firm Supply. Produce Pride, Inc., supplies sweet corn to canneries located throughout the Missouri River Valley. Like many grain and commodity markets, the market for sweet corn is perfectly competitive. With $500,000 in fixed costs, the company’s total and marginal costs per ton (Q) are: TC = $500,000 + $400Q + $0.04 Q squared MC =? a. Calculate the industry price necessary to induce short-run firm supply in tons of: a.i. $05,000 a.ii. $10,000 a.iii. $15,000 Assume that MC > AVC at every point along the firm’s marginal cost curve and that the total costs include a normal profit. b. Calculate short0run firm supply at industry prices per ton of: b.i. $0,400 b.ii. $1,000 b.iii. $2,000 c. Construct a model that reflects your inputs and results. 2. Regulation Cost. Kingston Components, Inc., produces electronic components for cable TV systems. Given vigorous import competition, prices are stable at $4,500 per unit (MR) in this dynamic and very competitive market. Kingston’s annual total cost (TC) relations are: TC = $7,000,000 + $500Q _ $0.5Q squared Where Q is output
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MC =? Suppose the Occupational Health and Safety Administration (OSHA) has recently ruled that the company must install expensive new shielding equipment to guard against worker injuries (to prevent negative externality). This will increase the marginal cost of manufacturing by $100 per unit. Kinston’s fixed expenses, which include a required return on investment, will be unaffected. A. Calculate Kinston’s profit-maximizing price/output combination and economic profits before installation of the OSHA-mandated shielding equipment. B. Calculate the profit-maximizing price/output combination and economic profits after Kingston has met OSHA guidelines. C. Compare your answers to parts A and B. Who pays the economic burden of meeting OSHA guidelines? D. Construct a model that reflects your inputs and results. 3. Price Floors and Consumer Surplus. The U.S. wheat crop averages about 2 billion bushels per year, and is about 10% of the 20 Billion-bushel foreign wheat crop. Typically, the market has a relatively good estimate of the wheat crop from the United States and Canada, but wheat crops from the Southern Hemisphere are much harder to predict. Argentina’s wheat acreage varies dramatically from one year to another, for example and Australia has a hard-to-predict rainfall in key wheat production areas. To illustrate some of the cost in social welfare from agricultural price supports, assume the following market supply and demand conditions for wheat: P = $2.00 + 0.001Qs (Market Supply) P= $4.80 – 0.0004Qd (Market Demand) Where Q is output in bushels of wheat (in millions), and P is the market price per bushel. a. Graph and calculate the equilibrium price/output solution. b. Use this graph to help you algebraically determine the loss in consumer surplus due imposition of a $4.40 per bushel price support program. Explain. 4. Monopoly Equilibrium. Paradox Dental, Ltd., enjoys a local monopoly in the provision of oral examination services, in Tuskegee, Alabama, Total and marginal revenue relation for the standard procedure are: TR = $250Q-$0.001 Q squared MR =? Note: Marginal cost for the process is stable at $150 per unit. Fix cost are zero. a. As a monopoly, calculate Paradox Dental’s output, price, and profits at the profit maximizing activity level.
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