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INTRODUCTION TO MICROECONOMICS (SP21)

QUESTION 1

Complete the following Cost Table:

QUESTION 2

Below is price and cost data of a perfectly competitive firm:

Price = $100

TC = 50 + 2Q + 0.5q²

MC = 2 + q

a. At what level of output (q*) will the firm maximize its profits?

b. At that level of output, q*, how much Total Revenue does the firm earn?

c. How much profit does the firm make by producing q*?

d. What is the firm’s TFC?

e. What is the firm’s AVC at the output level q*?

QUESTION 3

Consider a firm operating in a perfectly competitive market with the following cost and

 pricing data:

Price = $150

MC = 2 +20q

Total Cost = 10 + 2q + 10q²

i. Find the firm’s equilibrium price and output (q*).

ii. What is the firm’s Total Revenue at output level q*?

iii. How much profit does the firm make at q*?

iv. What is the firm’s ATC at q*?

v. What is the firm’s AVC at q*?

vi. What is the firm’s TFC?

vii. Should the firm remain open or should it close? Explain

QUESTION 4

A monopoly firm has the following demand and cost conditions:

Demand:   P = 10 – 6q

Total Cost: TC = 1000 + 20q + q²

Marginal Cost: MC = 20 + 2q

a. Find the output level q* which maximizes profit

b. Calculate the monopolist’s profit (or loss) at q*

c. What is the monopolist’s TFC?

d. Should the firm shutdown or continue to produce at the output level q*?

e. Why or Why not? Explain

QUESTION 5

Assume a monopoly market characterized by the following:

P = 100 - 3Q (demand curve)

MC = 20 + 2Q (marginal cost curve)

i. Find the monopolist’s equilibrium price and quantity consistent with profit maximization

ii. What is the monopolist’s total revenue at the equilibrium quantity?

QUESTION 6

Consider a firm producing under conditions of pure competition, in a market characterized by the following demand and supply conditions:

P = 200 – 0.5Qd (Demand); P = 60 + 1.5Qs (Supply)

i. What is the market equilibrium price and quantity?

ii. If a representative firm has a Marginal Cost function that is depicted below, at what level of output would it maximize its individual profits?

MC = 180q – 15

iii. If all of the firms were identical, how many would constitute the market?