Homework 3

Micro

Due Monday, November 2

(1)   What is the main overriding goal of most businesses?

 

 

(2)      Fill in the following table:

 

Q	TFC	TVC	TC	AFC	AVC	ATC	MC
0	5,000	0		xxxxxxxx	xxxxxxxx	xxxxxxxx	3,000                         4,000
1		3,000
2		5,000
3			11,000
4						3,250
5

 

 

            (a) Can you tell if this is the short run or long run?  Explain.

 

 

            (b) Can you tell which level of output yields the highest profit?  If so, what is the output level.  If not, explain.

 

 

(3)   Draw a U-shaped average total cost curve and a marginal cost curve on the same graph.

 

(4)   Do problem 8 on page 327.

 

(5)   Do problem 12 on page 327.

 

(6)   What are the characteristics of a perfectly competitive industry?

 

 

 

(7)   Fill in the following table for a firm in a perfectly competitive industry.<span style="mso-spacerun: yes">  </span>Note that the MR and MC numbers go in between the other rows, so you have only 3 MR and 3 MC to fill in.

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Quantity	Price	TR	TC	Profit	ATC	MR	MC
5	$100	$500	$300	<![if !supportEmptyParas]> <![endif]> <o:p></o:p>	$60	<![if !supportEmptyParas]> <![endif]> <o:p></o:p> $100	<![if !supportEmptyParas]> <![endif]> <o:p></o:p> $30 <![if !supportEmptyParas]> <![endif]> <o:p></o:p>
6	$100	<![if !supportEmptyParas]> <![endif]> <o:p></o:p>	$330	<![if !supportEmptyParas]> <![endif]> <o:p></o:p>	<![if !supportEmptyParas]> <![endif]> <o:p></o:p>
7	$100	<![if !supportEmptyParas]> <![endif]> <o:p></o:p>	$420	<![if !supportEmptyParas]> <![endif]> <o:p></o:p>	<![if !supportEmptyParas]> <![endif]> <o:p></o:p>
8	$100	<![if !supportEmptyParas]> <![endif]> <o:p></o:p>	$520	<![if !supportEmptyParas]> <![endif]> <o:p></o:p>	<![if !supportEmptyParas]> <![endif]> <o:p></o:p>
9	$100	<![if !supportEmptyParas]> <![endif]> <o:p></o:p>	$630	<![if !supportEmptyParas]> <![endif]> <o:p></o:p>	<![if !supportEmptyParas]> <![endif]> <o:p></o:p>

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<![if !supportLists]>(a)<span style="font:7.0pt &quot;Times New Roman&quot;"> </span><![endif]>What is the highest profit possible?

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<![if !supportLists]>(b)<span style="font:7.0pt &quot;Times New Roman&quot;"> </span><![endif]>What is the profit maximizing price?

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<![if !supportLists]>(c)<span style="font:7.0pt &quot;Times New Roman&quot;"> </span><![endif]>What is the profit maximizing level of output?

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<![if !supportLists]>(d)<span style="font:7.0pt &quot;Times New Roman&quot;"> </span><![endif]>If you were only given the first column (Q) and the last two columns (MR and MC) explain how you would determine the profit maximizing level of output.

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<![if !supportLists]>(e)<span style="font:7.0pt &quot;Times New Roman&quot;"> </span><![endif]>How you do know that this is a table for a perfectly competitive firm?

 

(8) Do problem 3 on page 352.

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(9) In the graph below clearly show the profit maximizing price P*, the profit maximizing level of output Q*, and the average total cost ATC*.<span style="mso-spacerun: yes">  </span>Is this firm making a profit or a loss?<span style="mso-spacerun: yes">  </span>Shade in the area that represents the profit or loss.<span style="mso-spacerun: yes">  </span>What will happen in the long run?

 

 

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